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Category: Stock Market and American Airlines (AAL)
Date: 23 July 2020 Stock Price of American Airlines : $11.37 We take a look at the 2n quarter earnings report of their 2020 fiscal year of American Airlines. The group (and all its peers) have been hit very hard by the Covid-19 pandemic and the impact is had on travel, both locally and abroad. For the 2nd quarter of 2020 the group's revenue declined by -86.4% and they suffered a loss of -$2.067 billion. The average cash burn rate during the quarter was $55 million a day. However by June 2020 this has improved to $30 million a day
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This was one of the most challenging quarters in American’s history- American Airlines Chairman and CEO Doug Parker "
About American Airlines
American Airlines and American Eagle offer an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries. American has hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. American is a founding member of the oneworld® alliance, whose members serve more than 1,000 destinations with about 14,250 daily flights to over 150 countries. Shares of American Airlines Group Inc. trade on NASDAQ under the ticker symbol AAL. In 2015, its stock joined the S&P 500 index
Overview of American Airlines 2nd quarter 2020 earnings report
The data below refers to the numbers of the latest quarter (unless specified otherwise)
- Revenue: $1.622 billion (down from $11.960 billion for the same quarter of the previous year)
- Revenue decreased by -86.4% over the last 12 months
- Total operating expenses: $4.108 billion (down from $10.807 billion for the same quarter of the previous year)
- Total operating expenses decreased by -62% over the last 12 months
- Net loss: -$2.067 billion (down from $185 million for the same quarter of the previous year)
- Diluted loss per share: -$4.82 (down from $1.49 for the same quarter of the previous year)
- Weighted average shares outstanding-diluted: 428.807 million (down from 445.587 million for the same quarter of the previous year)
- Cash and equivalents: $462 million
- Cash and cash equivalents per share: $1.07
- Cash and cash equivalents makes up 0.72% of the American Airlines' total assets
- Cash and cash equivalents makes up 9.4% of American Airlines' current market capital
- Accounts and notes receivable: $879 million
- Accounts and notes receivable makes up 1.4% of the group's total assets
- Long-term debt and finance leases, net of current maturities: $28.698 billion
- Long-term debt and finance leases, net of current maturities increased by 33.7% over the last 12 months
- The continued increase in debt and finance leasing is taken up to ensure the group can stay afloat considering that they burnt through roughly $55 million a day. During June however the cash burn rate per day was sitting at $30 million
- Goodwill of American Airlines: $4.091 billion
- Goodwill makes up 6.3% of American Airlines total assets
American Airlines management commentary on their 2nd quarter 2020 earnings
FORT WORTH, Texas — American Airlines Group Inc. (NASDAQ: AAL) today reported its second-quarter 2020 financial results, including:
“This was one of the most challenging quarters in American’s history,” said American Airlines Chairman and CEO Doug Parker. “COVID-19 and the resulting shutdown of the U.S. economy have caused severe disruptions to global demand for air travel. In spite of these challenges, the American Airlines team has done a phenomenal job taking care of our customers and our fellow team members.
“We have moved swiftly to improve our liquidity, conserve cash and ensure customers are safe when they travel,” Parker continued. “There is much uncertainty ahead, but we remain confident we will emerge from this crisis more agile and more efficient than ever before.”
- Second-quarter pretax loss of $2.7 billion. Excluding net special items1, second-quarter pretax loss of $4.3 billion.
- Second-quarter net loss of $2.1 billion, or ($4.82) per share. Excluding net special items1, second-quarter net loss of $3.4 billion, or ($7.82) per share.
- Boosted available liquidity by a net $3.6 billion in the quarter through offerings of common stock, convertible bonds and secured bonds.
- Ended second quarter with approximately $10.2 billion of available liquidity. Additionally, signed term sheet with the U.S. Department of the Treasury for $4.75 billion secured loan, which is expected to close in the third quarter, and announced two senior secured note transactions totaling $1.2 billion. The company’s second-quarter pro forma liquidity balance including these transactions would be approximately $16.2 billion.
“This was one of the most challenging quarters in American’s history,” said American Airlines Chairman and CEO Doug Parker. “COVID-19 and the resulting shutdown of the U.S. economy have caused severe disruptions to global demand for air travel. In spite of these challenges, the American Airlines team has done a phenomenal job taking care of our customers and our fellow team members.
“We have moved swiftly to improve our liquidity, conserve cash and ensure customers are safe when they travel,” Parker continued. “There is much uncertainty ahead, but we remain confident we will emerge from this crisis more agile and more efficient than ever before.”
Conserving cash
American continues to take steps to reduce costs and preserve cash. The airline estimates that it will reduce its 2020 total operating and capital expenditures by more than $15 billion, achieved primarily through cost savings resulting from less flying. In addition, the company implemented the following cost actions:
Bolstering liquidity
In addition to reducing its operating and capital expenditures, American has taken a number of steps to strengthen its liquidity position. The company:
Demand and capacity outlook
Passenger demand and load factors have improved since bottoming out in April, but continue to be significantly below 2019 levels. While May and June revenue trends were encouraging, demand has weakened somewhat during July as COVID-19 cases have increased and new travel restrictions have been put into place. The company will continue to match its forward capacity with observed bookings trends and presently expects its third quarter system capacity to be down approximately 60% year over year.
American continues to take steps to reduce costs and preserve cash. The airline estimates that it will reduce its 2020 total operating and capital expenditures by more than $15 billion, achieved primarily through cost savings resulting from less flying. In addition, the company implemented the following cost actions:
- Retired four aircraft types, consisting of 20 Embraer 190s, 34 Boeing 757s, 17 Boeing 767s and nine Airbus A330-300s, along with a number of older regional aircraft. In addition, the company placed its Airbus A330-200s and certain older Boeing 737s into a temporary storage program. In aggregate, these changes remove more than 150 aircraft from the fleet and bring forward the cost savings and efficiencies associated with operating fewer aircraft types.
- Introduced additional voluntary leave of absence and early-out programs to help right-size its frontline team. American anticipates having over 20,000 more team members on payroll than needed to operate its fall schedule. In total, more than 41,000 team members have opted for an early retirement, a reduced work schedule or a partially paid leave.
- Consistent with the CARES Act, reduced its management and support staff team, including officers, by approximately 5,100 positions, or 30%.
- Announced changes to its international schedule for 2021. American expects its summer 2021 long-haul international capacity to be down 25% versus 2019 and also plans to exit 19 international routes from six hubs. These changes will allow the airline to reset its international network for future growth as demand returns.
- Reduced non-aircraft capital expense by $700 million in 2020 and another $300 million in 2021 through reductions in fleet modification work, the elimination of all new ground service equipment purchases, and pausing all noncritical facility investments and IT projects.
Bolstering liquidity
In addition to reducing its operating and capital expenditures, American has taken a number of steps to strengthen its liquidity position. The company:
- Ended the second quarter with $10.2 billion of available liquidity, including a net $3.6 billion raised in the quarter through offerings of common stock, convertible bonds and secured bonds. The company also raised $360 million through municipal facility bonds, the net proceeds from which are included in its restricted cash and short-term investments.
- Refinanced the delayed draw term loan credit facility the company entered into in March 2020, which was set to mature in March 2021. By refinancing this loan, American does not have any large non-aircraft debt maturities until its $750 million unsecured bonds mature in June 2022.
- Signed a term sheet with the U.S. Department of the Treasury for a $4.75 billion secured loan under the CARES Act. The company expects the loan to be finalized in the third quarter.
- Announced $1.2 billion of committed financing subject to final documentation and other closing conditions in the form of two senior secured note transactions to be collateralized by intellectual property and other assets with Goldman Sachs Merchant Bank. The company expects these notes to be issued in the third quarter.
- Reduced its daily cash burn rate from nearly $100 million in April to approximately $30 million in June. This improvement was driven by higher than forecast revenue and larger savings resulting from the company’s cost-reduction initiatives. The company’s second-quarter cash burn rate was approximately $55 million per day vs. its previous forecast of $70 million per day.
Demand and capacity outlook
Passenger demand and load factors have improved since bottoming out in April, but continue to be significantly below 2019 levels. While May and June revenue trends were encouraging, demand has weakened somewhat during July as COVID-19 cases have increased and new travel restrictions have been put into place. The company will continue to match its forward capacity with observed bookings trends and presently expects its third quarter system capacity to be down approximately 60% year over year.
American Airlines (AAL) stock price history
The image below, obtained from Google, shows the stock price history of American Airlines (AAL) over the last 5 years. And it's not been a very good time for American Airlines. 5 years ago the stock of American Airlines was trading at $39.70 a stock and its currently trading at $11 That's a loss of -71.3% suffered by American Airlines stockholders over the last 5 years
The stock of American Airlines is trading at a lot closer to its 52 week low of $8.25 than it is to its 52 week high of $34.99 which to us is a clear indication that the short term sentiment and momentum of American Airlines stock is very negative at this point in time.
The stock of American Airlines is trading at a lot closer to its 52 week low of $8.25 than it is to its 52 week high of $34.99 which to us is a clear indication that the short term sentiment and momentum of American Airlines stock is very negative at this point in time.
American Airlines (AAL) vs Delta Airlines (DAL) vs Southwest (LUV) stock over the last 3 years
The image below shows the stock price performance of American Airlines (AAL), Delta Airlines (DAL) and Southwest Airlines (LUV) over the last 3 years. As the image shows all three airlines suffered major stock price declines since the start of 2020 as the impact of Covid-19 on travel started being felt. Over the 3 year period they provided the following returns to investors, sorted from best to worst performer
- Southwest Airlines (LUV): -39.86$
- Delta Airlines (DAL): -48.3%
- American Airlines: -77.5%
Recent coverage of American Airlines (AAL)
The extract regarding American Airlines below is as obtained from Forbes.com
The hopes of a vaccine by Moderna helped drive the markets higher this week with Dow up by 2.3% and S&P 500 gained 1.3%. The Nasdaq NDAQ +2.4% lost 1.1% in contrast, as Tech stocks were under pressure in the latter half of the week. We saw several companies declare their quarterly results with many of them beating the estimates that were projected, with a glaring exception in Netflix, which lost 6.5% on Friday after missing estimates and guidance. Economic data also showed some signs of revival in the housing sector as retail sales picked up. Hopes of a fiscal stimulus also seemed to lift investor spirits. The US consumer sentiment index was below expectation on account of the pandemic resurging, putting a check on the rally. If you’re trying to analyze the data and want some help, our deep learning algorithms paired with Artificial Intelligence (“AI”) technology have rated some Trending Stocks this week below.
Read the full article here
The hopes of a vaccine by Moderna helped drive the markets higher this week with Dow up by 2.3% and S&P 500 gained 1.3%. The Nasdaq NDAQ +2.4% lost 1.1% in contrast, as Tech stocks were under pressure in the latter half of the week. We saw several companies declare their quarterly results with many of them beating the estimates that were projected, with a glaring exception in Netflix, which lost 6.5% on Friday after missing estimates and guidance. Economic data also showed some signs of revival in the housing sector as retail sales picked up. Hopes of a fiscal stimulus also seemed to lift investor spirits. The US consumer sentiment index was below expectation on account of the pandemic resurging, putting a check on the rally. If you’re trying to analyze the data and want some help, our deep learning algorithms paired with Artificial Intelligence (“AI”) technology have rated some Trending Stocks this week below.
Read the full article here
American Airlines (AAL) latest stock valuation
So based on American Airlines 1st quarter 2020 earnings report what do value the stock of American Airlines at? Based on the earnings report our valuation model provides a target price (full value price) for American Airlines at $10.10 a stock. It is exceptionally hard to value a firm that is loss making and has stockholders deficit we do feel the current valuation is apt considering their expectations on passenger volumes and their daily cash burn rate.We therefore believe the stock of American Airlines is slightly overvalued at its current price of $11.37
We usually recommend that investors look to enter a stock at least 10% below our target price which in this case s $10.10. A good entry point into the stock of American Airlines would therefore be at $9.10 or below. Since the stock of American Airlines is trading at well above our full value price we rate the stock of American Airlines as avoid
We usually recommend that investors look to enter a stock at least 10% below our target price which in this case s $10.10. A good entry point into the stock of American Airlines would therefore be at $9.10 or below. Since the stock of American Airlines is trading at well above our full value price we rate the stock of American Airlines as avoid
American Airlines (AAL) next earnings release
American Airlines is expected to release their 3rd quarter 2020 earnings report on 22 October 2020