American Airlines Group Inc. (AAL) operates as a network air carrier. The company provides scheduled air transportation services for passengers and cargo through its hubs and partner gateways worldwide.
Despite persistent macroeconomic challenges, AAL has significantly improved its financial performance.
Moreover, amid the ongoing travel boom, AAL is in talks with Airbus and Boeing over a new narrowbody jet order. Boeing's 737 Max and Airbus' A321neo are being considered to replace the airline's 737-800, A319, and A320 single-aisle planes later this decade. For the next several years and until the end of the decade, the airline forecasts aircraft capex to average $3.5 billion per year.
"We are talking to Boeing and Airbus about our narrowbody aircraft needs for the latter half of this decade and beyond," AAL said.
In May, AAL signed a new lease at Dallas-Fort Worth International Airport that includes building a new terminal and remodeling one of the airport's five existing terminals, airline and airport officials announced. The program is intended to prepare for the expected increase in air travel.
Given this situation, let’s look at AAL’s key financial metrics trends to understand why this stock could be a sound portfolio addition now.
Analyzing AAL’s Financial Performance
AAL’s trailing-12-month net income from 2020 to 2023:
- On September 2020, AAL reported a loss of -$6.29 billion. Net loss was increased to -$8.89 billion by the end of December 2020.
- Throughout 2021, there was a steady decrease in losses. This started with a net income of -$7.89 billion in March, reduced further to -$5.81 billion by June, -$3.24 billion in September, and -$1.99 billion by the end of December.
- In the first quarter of 2022, there was a slight increase in losses to -$2.38 billion, but the figures improved progressively over the following quarters, reducing to -$1.92 billion in June and -$1.61 billion in September.
- Remarkably, by December 2022, AAL registered positive growth for the first time in the given timeline, with a net income of $127 million.
- This growth continued well into 2023, with AAL recording a net income of $1.77 billion at the end of the first quarter and reaching $2.63 billion by the end of the second quarter.
From the first recorded data on the series (-$6.29 billion in September 2020) to the last value ($2.63 billion in June 2023), the growth rate of AAL stands profoundly. This signifies critical recovery and financial stabilization after a stretch of sustained losses. The impressive positive swing in AAL’s net income into 2023 indicates a very optimistic financial turnaround.
The trailing-12-month revenue trend for AAL over the observed period shows a marked increase, despite periods of fluctuations. Key points are summarized below in chronological order:
- September 30, 2020: AAL’s revenue stood at $24.62 billion.
- End of 2020: Revenue experienced a decrease to $17.34 billion in December.
- Through the first half of 2021: There was a continued drop to $12.83 billion by March before rebounding slightly to $18.69 billion by the end of June.
- By the end of 2021: A notable rise in revenue occurred, reaching $29.88 billion in December.
- Through 2022: There were continuous improvements in revenue, hitting $34.77 billion by March, $40.72 billion by June, and $45.21 billion by September.
- By December 31, 2022: The revenue saw its peak at $48.97 billion.
- First Half of 2023: It reached $52.26 billion in March, however, noting a slight drop to $52.89 billion in June.
From the initial value in September 2020 to the final recorded value in June 2023, AAL’s revenue grew from $24.62 billion to $52.89 billion. This is approximately a 115% increase over the examined period.
The gross margin of AAL has been on a general trend of improvement over the years from 2020 to 2023:
- September 30, 2020: The gross margin was 41.9%.
- December 31, 2020: The gross margin dropped to 31.2%, marking a decrease from the third quarter.
- March 31, 2021: The gross margin dipped to 21.0%, continuing the downward trend.
- June 30, 2021: The gross margin rebounded to 36.1%.
- September 30, 2021- The gross margin rose up to 43.0%, beating the previous year's figure at the same time.
- December 31, 2021- The gross margin continued its positive run, reaching 46.4%.
- March 31, 2022: The gross margin further increased to 47.5%.
- June 30, 2022: It increased marginally to 47.7%.
- September 30, 2022- A slight increase was witnessed as the gross margin hit 47.8%.
- December 31, 2022- The gross margin reached 49.0%, closing the year on a high note.
- March 31, 2023: A new high was set as the gross margin hit 50.5%.
- June 30, 2023: This upward trend persisted, with the gross margin reaching 53.0% by mid-2023.
Looking at the series overall, it appears that the gross margin of AAL experienced some oscillations in 2020 and 2021 but started a steady climb from late 2021 onwards. As of June 30, 2023, the gross margin stands at 53.0%, seeing a growth rate of 26.5% since the start of the series.
Analysis of AAL’ Share Price Fluctuations from February to August 2023
The data provided presents the share prices of AAL from February 17, 2023 to August 9, 2023.
- On February 17, 2023, the share price was $16.56.
- By February 24, 2023, a decline was observed as the price dropped to $15.67.
- In early March, the price slightly rose before experiencing another decline by mid-March, where it reached $14.32 on March 17, 2023.
- The share price remained steady around the $14 mark throughout late March and into April.
- By late April, the share price further reduced to around $13, reaching a low point of $13.09 on April 28, 2023.
- From May 5, 2023, to June 30, 2023, the share price showed a consistent and stable uptrend, with an increase from $13.75 to $17.31.
- In July, a slight growth in the share price continued, reaching its peak on July 14, 2023, at $18.53.
- After this peak, a decelerating trend was noted, with the price falling back down to $16.11 on August 4, 2023, and then slightly down to $15.76 on August 9, 2023.
Overall, the AAL stock was volatile during the examined time. There was a noticeable downward trend from February to April 2023. Beginning in May 2023, we see an obvious increasing pattern that peaks in July 2023 before slowing down until August 2023. Here's a look at the pricing of AAL over the last 180 days.
Evaluating AAL’s Performance: Growth, Momentum, and Value
AAL has an overall B rating, translating to a Buy in our POWR Ratings system. It is ranked #12 out of the 28 stocks in the B-rated Airlines category.
- As of February - March 2023, the POWR grade maintained a constant C rating, with the ranks ranging between 8 to 11.
- From April to the onset of May 2023, there was no change in the POWR grade, remaining at C, and the ranking shuffled between 8 to 11.
- In May 2023, a positive shift occurred where the POWR grade elevated to B. The ranking also improved, noting lower numbers around 6 to 8.
- In June 2023, the ranking fluctuated between 8 and 9.
- The trend continued similarly throughout July 2023, with the rank oscillating between 9 and 10.
- By August 2023, the rank increased further up to 12, also the POWR grade stayed at B.
Based on the given POWR Ratings, three dimensions of AAL stand out with the most noteworthy movements across the timeline - these are Growth, Momentum, and Value.
Growth: This dimension of the POWR Ratings for AAL has shown high values in 2023. In February, AAL held a growth rating of 97. Although a slight decrease is noted towards the end of this period, with a value of 65 in August, the general trend demonstrates strong growth.
Momentum: The Momentum dimension showed a clear upward trend with significant improvement over time. From a low of 31 in February 2023, the rating rose to an excellent 67 in August 2023.
Value: The value rating remained relatively stable, with only slight fluctuations over time. The score was 80 in February and maintained a solid performance until August, where it held steady at 93. This stability suggests a consistent value aspect valued by investors.
These three dimensions bind a concise picture of AAL performance and trends over this period. While its growth potential slightly dwindled, its value and momentum surged considerably. These factors provide valuable insights into AAL market strategies and their outcomes.
How does American Airlines Group Inc. (AAL) Stack Up Against its Peers?
Other stocks in the Airlines sector that may be worth considering are Air France-KLM SA (AFLYY), Singapore Airlines Limited (SINGY), and Deutsche Lufthansa AG (DLAKY) -- they have better POWR Ratings.
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AAL shares were trading at $15.71 per share on Thursday afternoon, down $0.05 (-0.32%). Year-to-date, AAL has gained 23.51%, versus a 17.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
Is American Airlines Group (AAL) a Quality Stock to Buy? StockNews.com
