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Analyst Recommendations for American Airlines after 4Q17 Earnings

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Jan. 30 2018, Updated 7:34 a.m. ET

Analysts’ consensus for American Airlines

There is no change in analysts’ views on American Airlines after its 4Q17 earnings release. About 56% of them are still recommending a “buy” for the stock, 39% are recommending a “hold,” and 5% are recommending a “sell.”

However, analysts’ consensus target price for American Airlines has risen marginally to $63.94. Prior to the earnings release, it was $63.40. The current target price implies a return potential of 20.5% from the closing price of $53.07 on January 26, 2018.

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AAL’s 4Q17 earnings and revenue both beat analysts’ estimates. However, investors appeared to be disappointed with its fiscal 2018 earnings guidance. AAL expects its fiscal 2018 adjusted EPS (earnings per share) to be $5.50–$6.50. Although its guidance looks better, it’s expected to benefit from lower corporate taxes and continued share repurchases. The other challenge for AAL could be higher fuel prices. If AAL can convert its revenue growth into higher margins by having better control over its operating expenses, the stock could benefit significantly.

Brokerage firms’ views

  • Morgan Stanley (MS) has raised its target price for AAL to $60, which implies a return potential of 13% over its closing price on January 26, 2018.
  • Bank of America Merrill Lynch has raised its price for AAL to $70, implying a return potential of 31.9% from its current closing price on January 26, 2018.

Investors can indirectly hold American Airlines by investing in the iShares Edge MSCI Multifactor Industrials (INDF), which has invested 2.2% of its portfolio in American Airlines. The other holdings of the fund include Boeing (BA), 3M (MMM), and General Electric (GE) with weights of 5.3%, 4.1%, and 3.9%, respectively, as of January 26, 2018.

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