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It’s Friday. Time to give you a stock pick from our sister newsletter, The Spill, so you can think about it over the weekend and maybe make a move Monday morning. While The Juice helps you be better with money across the board, The Spill focuses on stocks financial pros are researching and judges how good of buys they are. If you’re already sold, you can sign up for The Spill – for free – here. |
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Proprietary Data Insights Financial Pros’ Top Airline Stock Searches in the Last Month
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American Knocks Off United as Top TrackStar Airline Search |
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This month it slipped to #3 as American Airlines (AAL) took the top spot from #4. American reported earnings and revenues last week that were in line with expectations. Since then, the stock has gained almost 7%. Is it time to cash in those frequent flyer miles for shares of AAL? American Airlines’ Business American Airlines is the largest airline in the world when measured by fleet size, scheduled passengers carried, and revenue passenger mile. It operates an extensive network with almost 6,800 flights per day to nearly 350 destinations in more than 50 countries. The airline is a founding member of the Oneworld alliance, the third-largest airline alliance in the world. American Airlines and American Eagle operate out of 10 hubs, with Dallas/Fort Worth (DFW) being its largest. As of 2021, the company has more than 200 million passengers traveling with them annually and employs 123,400 staff members. The company’s latest quarterly report continued a turnaround as the company returned to profitability in the first quarter of this year compared to the prior year.
Source: AAL Investor Relations In that same report, the company noted limited risk on maturing debt. A younger fleet is helping the company reduce capital expenditures. Management expects to reduce its total debt from $54 billion to $43 billion by the end of 2023. Financials
Source: Stock Analysis United’s revenues grew substantially in the past year as demand soared. Pricing power also helped lift margins, though they remain far below pre-pandemic levels. Last quarter also saw improved cash from operations exceeding $3.3 billion for the first time since June 2021 and after negative cash flows from the prior quarter. Valuation
Source: Seeking Alpha AAL is the cheapest amongst its peers when looking in the rearview mirror. However, it’s the middle of the road when looking forward. Notably, most airlines trade at low price-to-cash multiples since it’s expected they’ll use cash to clear debt accumulated during the pandemic. Growth
Source: Seeking Alpha Similar to Delta Airlines (DAL), American hit 50% revenue growth YoY. All the carriers expect revenues somewhere north of 20% for 2023, though any specifics are guestimates at best right now. Profitability
Source: Seeking Alpha We do like American’s gross margins sitting near the top. Yet, we’d like to see its EBIT improve a bit more, as well as its net income margin. But otherwise, it’s largely in line with its peers.
Our Opinion 8/10 Like United, we like the risk/reward of taking a position at these prices. Demand for leisure and travel doesn’t appear to be in danger even if we hit a recession. In fact, a recession could cut the price of oil and reduce input costs for airlines. |
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