CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows:
We cut our 12-month target by $7 to $13, 6.0x our 2024 EPS view ($2.17 from $3.26; 2023’s cut to $2.43 from $3.01), below AAL’s 2018-2019 historical forward average of 6.9x. We think a discount is merited due to rising unit costs. Q3 EPS of $0.38 vs. $0.69, beat consensus by $0.12. Q3 passenger revenues were flat Y/Y, as AAL’s international segment (+5%) was not enough to offset the 2% decline within its domestic segment (69% of Q3 passenger revenues). In Q3, AAL finalized a new labor contract with its pilots, including $9.6B in total compensation (increasing pay by 46% over the next four years); however, AAL noted that it has yet to finalize a deal with its flight attendants and agents, which we think will place additional pressure on unit costs. Also, the recent recovery in crude oil pricing (+29% in Q3 vs. Q2) presents another headwind for AAL, as the EIA now forecasts WTI to average $80/b in 2023 (vs. $95/b in 2022) and $91/b in 2024, and we estimate operating margins could fall by 3% in 2024 vs. 2023.