Market News

American Airlines Posts Lower-Than-Feared $2.2B Loss; Shares Gain 15%

American Airlines posted a lower-than-feared quarterly loss of $2.2 billion as sales topped analysts’ expectations. Shares surged 15% in Thursday’s morning trading.

American Airlines (AAL) reported a net loss of $2.2 billion in the fourth quarter after posting net income of $414 million in the year-ago period. The US air carrier incurred an adjusted loss per share of $3.86, topping analysts’ expectations of a loss of $4.11 per share.

Revenue plunged 64% to $4 billion year-on-year, but exceeded the Street consensus of $3.88 billion. Furthermore, American Airlines lowered its daily cash burn rate to $30 million in the fourth quarter from almost $100 million in April 2020.

“Our fourth-quarter financial results close out the most challenging year in our company’s history,” said American Airlines CEO Doug Parker. “The American team flew more customers than any other airline in 2020. As we look to the year ahead, 2021 will be a year of recovery. While we don’t know exactly when passenger demand will return, as vaccine distribution takes hold and travel restrictions are lifted, we will be ready.”

American Airlines ended the fourth quarter with about $14.3 billion of total available liquidity. The air carrier expects to end the first quarter of 2021 with about $15 billion in total available liquidity. First-quarter system capacity is projected to be down 45%, with total revenue forecasted to be down 60% to 65% year-on-year.

Shares in American Airlines have lost 38% of their value over the past year as stringent travel restrictions tied to the coronavirus pandemic have brought travel demand to an almost halt. US airlines have been incurring huge losses and implementing broad cost-cutting plans, as well as taking steps to shore up their cash buffers. (See American Airlines stock analysis on TipRanks).

That said, AAL has seen some relief over the past three months, with the stock advancing more than 50% as the rollout of a safe and effective COVID-19 vaccine spurred optimism for a recovery of the aviation industry.

Citigroup analyst Stephen Trent this week reiterated a Sell rating on the stock, citing mounting pressure on the airline’s Mexico and Caribbean flight routes due to Covid-19 requirements, as well as higher nonfuel unit costs.

Overall, the rest of the Street has a moderately bearish outlook on the stock. The Moderate Sell consensus rating breaks down into 7 Sells and 4 Holds. That’s with an average analyst price target of $13.57, implying 26% downside potential lies ahead over the coming year.

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