American Airlines Earnings: Hurricanes and CrowdStrike Outage Had Little Effect
We’ve slightly raised our fair value estimate of American’s stock.
Key Morningstar Metrics for American Airlines Group
- Fair Value Estimate: $12.10
- Morningstar Rating: 3 stars
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: High
What We Thought of American Airlines Group’s Earnings
Hurricanes Debby and Helene and the CrowdStrike outage had little effect on American Airlines Group’s AAL results, amounting to about $90 million of losses in a quarter that saw $13.6 billion in revenue. The airline is trying to regain lost business from mishandling its corporate and travel agency booking relationships. American’s financial results were broadly in line with our expectations, and we increased our fair value estimate for the stock to $12.10 per share, essentially for the time value of money.
Like its competitors, the company will rein in capacity expansion and capital spending in the near term. However, these savings are largely offset in our forecast by incremental cost growth, primarily for labor agreements, maintenance, and regional jet capacity. Our midcycle forecast of American’s operating margin came down to 8.8% from 10.0% as a result of projecting those costs over slightly lower capacity. Less capital spending offset the effect on our fair value estimate.
American Airlines Stock vs. Morningstar Fair Value Estimate
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