Key Highlights
- Jefferies upgraded AAL price target from $12 to $13 while maintaining Hold rating
- First quarter unit revenue jumped 7.6%; Q2 forecast projects 9.5%–10.5% increase
- Carrier launching $1.14 billion bond offering secured by 32 aircraft
- Rising fuel expenses pressuring margins; potential for 2026 net loss
- BMO Capital upgraded target to $13.50; Evercore maintains $14.00 estimate
American Airlines delivered first quarter results showing a loss per share of $0.40, surpassing Wall Street consensus estimates that had projected a $0.47 loss. Total revenue reached $13.91 billion, exceeding analyst expectations of $13.79 billion.
American Airlines Group Inc., AAL
First quarter performance showed unit revenue expansion of 7.6%. Management projects second quarter unit revenue will climb between 9.5% and 10.5%.
Following the quarterly report, Jefferies analyst Sheila Kahyaoglu increased her price objective on AAL from $12 to $13. The firm continues to rate the shares as Hold.
AAL is currently changing hands near $12.10, which falls short of InvestingPro’s Fair Value calculation of $14.05. This discrepancy indicates the stock could be trading below its intrinsic value.
Jefferies established a full-year EPS projection of $0.10, positioned within management’s broad guidance spanning from a loss of $0.40 to earnings of $1.10. The research firm highlighted opportunities for improved margin execution under favorable operating conditions.
BMO Capital likewise elevated its price objective, advancing from $12.00 to $13.50. BMO cited an improved revenue yield environment and noted that first quarter performance exceeded forecasts.
Raymond James maintained its Market Perform stance, recognizing advancement in narrowing the profitability differential versus established competitors. Evercore ISI preserved its In Line rating alongside a $14.00 valuation target.
$1.14 Billion Aircraft-Backed Financing Announced
This Monday, American Airlines unveiled plans for a $1.14 billion bond issuance designed to fund 32 aircraft across new and current fleet additions. The financing arrangement takes the form of enhanced equipment trust certificates, commonly known as EETCs.
The primary component consists of a $905 million tranche featuring an average maturity of 7.7 years. Initial pricing discussions center around a yield approximating 5.625%.
EETC structures enable airlines with below-investment-grade credit ratings to tap investment-grade bond markets by pledging aircraft as security. While S&P assigns AAL a B+ rating, positioned four levels beneath investment grade, the senior bonds in this offering are anticipated to receive an A rating from S&P.
Goldman Sachs, MUFG, and Morgan Stanley are coordinating the bond transaction.
Fuel Expenses Creating Margin Headwinds
Escalating oil prices continue applying pressure to airline profitability industry-wide. Fuel represents one of American’s most significant expense categories.
A week ago, the carrier reduced its annual earnings projection. Management cautioned that fiscal 2026 could conclude with negative earnings following the absorption of approximately $4 billion in incremental fuel expenditures.
American additionally deferred $300 million in aircraft delivery capital spending from 2026, providing enhanced financial flexibility.
The airline intends to expand capacity by roughly 4% during the current year, approximately double the industry average growth rate. Jefferies observed that prevailing macroeconomic conditions likely necessitate additional moderation to that capacity expansion plan.
According to InvestingPro intelligence, ten analysts have lowered earnings projections for the forthcoming reporting period.
AAL shares traded lower by approximately 2.4% Monday as market participants processed the bond announcement and earnings implications.
