TLDR
- Jefferies raised its AAL price target to $13 from $12, keeping a Hold rating
- Q1 unit revenue grew 7.6%, with Q2 guided at 9.5%–10.5% growth
- AAL is selling $1.14 billion in bonds backed by 32 planes
- Fuel costs are rising, and AAL warned it may end 2026 at a loss
- BMO Capital also raised its target to $13.50; Evercore holds at $14.00
American Airlines posted a Q1 loss per share of $0.40, which was actually better than the $0.47 analysts had expected. Revenue came in at $13.91 billion, topping the forecast of $13.79 billion.
American Airlines Group Inc., AAL
Unit revenue grew 7.6% in the first quarter. The company is guiding for Q2 unit revenue growth of 9.5% to 10.5%.
Jefferies analyst Sheila Kahyaoglu lifted her price target on AAL to $13 from $12 following the earnings release. She kept a Hold rating on the stock.
AAL currently trades around $12.10, below InvestingPro’s Fair Value estimate of $14.05. That gap suggests the stock may be undervalued at current levels.
Jefferies set its EPS estimate for the year at $0.10, sitting within the company’s own wide guidance range of -$0.40 to +$1.10. The firm noted potential for better margin performance if conditions cooperate.
BMO Capital also raised its target, moving from $12.00 to $13.50. BMO pointed to a more favorable yield outlook and said Q1 results beat expectations.
Raymond James kept a Market Perform rating, acknowledging progress in closing the margin gap with legacy peers. Evercore ISI held its In Line rating with a $14.00 price target.
Bond Sale Backs 32 Planes
On Monday, American Airlines launched a $1.14 billion bond sale to finance a group of 32 new and existing aircraft. The deal is structured as enhanced equipment trust certificates, or EETCs.
The larger portion of the deal is a $905 million offering with an average life of 7.7 years. It’s being discussed at a yield of around 5.625%.
EETCs let junk-rated carriers access investment-grade debt markets by using planes as collateral. S&P rates AAL at B+, four notches below investment grade, but the longer bonds are expected to be graded A by S&P.
Goldman Sachs, MUFG, and Morgan Stanley are running the bond sale.
Fuel Costs Remain a Pressure Point
Rising oil prices are squeezing airline margins across the board. For American, fuel is one of its biggest cost lines.
Last week, the company cut its full-year earnings target. It warned that it could end 2026 in the red after absorbing roughly $4 billion in additional fuel costs.
American also shifted $300 million of delivery capital expenditures out of 2026, giving itself some financial breathing room.
The airline plans to grow capacity close to 4% this year, about twice the broader market rate. Jefferies said that in the current macro environment, there likely needs to be further downward pressure on that capacity growth target.
Ten analysts have revised earnings estimates lower for the upcoming period, according to InvestingPro data.
AAL was trading down around 2.4% on Monday as the bond deal and earnings details filtered through the market.
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