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A
MERICAN
A
IRLINES
(AAL)
American Airlines (AAL)
AGENDA
 Industry Analysis
 Company Analysis
 Company Fundamentals
 Chart Analysis
 Competitors
 Competitive Analysis
 Final Recommendation
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Industry Analysis|Company Analysis|Company Fundamentals|Charts|Competitors|Recommendation
INDUSTRY ANALYSIS (AIRLINE INDUSTRY)
Overview Of Airline Industry in USA
 100 certified passenger airlines operating over 11
million flight departures per year
 Accounts for about 1/3rd of global air traffic
 815.3 million scheduled passengers traveled on
USA airlines in 2012.
 Commercial aviation contributes more than 8% of
USA’s GDP.
Industry Outlook
 The number of passengers will grow to 1.2 billion
in 2032, according to the FAA's annual forecast.
 Carriers expected to make a profit of $6.3 billion in
2014
 US Airline Industry to remain profitable for two
more decades
 Oil price volatility remains a significant challenge
http://www.nasdaq.com/article/airline-industrystock-outlook-dec-2013-industry-outlookcm310424#ixzz2vEkdMZEL
With a Zack’s industry rank of #16, and expected profit growths, the airline industry looks strong for the next few years.
http://www.nasdaq.com/article/airline-industry-stock-outlook-dec-2013-industry-outlook-cm310424
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Industry Analysis|Company Analysis|Company Fundamentals|Charts|Competitors|Recommendation
COMPANY ANALYSIS (AMERICAN AIRLINES)
Overview
eBay
Revenue & Market Share
 Recent merger with US Airways has re-established
AAL as a leader in airline industry in USA
 New Parent Company (American Airlines Group)
 Based out of Fort Worth, TX.
 626 fleets with 273 destinations at the moment
 Stock price up 58.2% since merger and relisting in
December 2013
Improvements From 2012
 PRASM (Passenger Revenue per Available Seat
Mile) in Dec 2013 increased 9% YoY
 RPM’s (Revenue Passenger Miles) increased by
11.9 billion (5%) YoY from Dec 2012.
A recent merger has helped an otherwise bankrupt AAL re-emerge in the airline market, with a higher market share and
more efficient trips and PRASM, RPM Values.
http://en.wikipedia.org/wiki/American_Airlines
http://hub.aa.com/en/nr/pressrelease/american-airlines-group-reports-december-traffic-results
http://hub.aa.com/en/nr/pressrelease/american-airlines-group-reports-fourth-quarter-and-full-year-2013-financial-results
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Industry Analysis|Company Analysis|Company Fundamentals|Charts|Competitors|Recommendation
COMPANY FUNDAMENTALS
Essential Statistics
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Beta: 2.91
Current Ratio: 1.04
Quarterly Revenue YoY Growth: 24.1%
Forward P/E: 7.38
Market Cap: $18.4 billion (Large Company)
Average Volume: 8.7m/ 10 days
Consistently Rising Revenues, but negative net profit margin.
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Industry Analysis|Company Analysis|Company Fundamentals|Charts|Competitors|Recommendation
CHART ANALYSIS
Source: Google Finance
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Industry Analysis|Company Analysis|Company Fundamentals|Charts|Competitors|Recommendation
COMPETITORS
Main Competitors
Revenue YoY Change
 Delta Airlines and United Continental hold largest
market shares ahead of AAL.
 ALK, DAL and HA experiencing consistent, fastpaced growth.
 AAL: 7.60%
United: 3.03%
Southwest: 3.58%
Delta, Alaska, United and Southwest are AAL’s major competitors.
Source: Google FInance
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Industry Analysis|Company Analysis|Company Fundamentals|Charts|Competitors|Recommendation
COMPETITIVE ANALYSIS
Competitive Analysis
 Positive synergies after merger
 World’s largest airline with greatest US
market share by revenue (28.7%)
 Larger customer platform
 Inducted 13 new Airbus A320 family aircraft, 2
Airbus A330-200 aircraft, 5 Boeing B737-800 and 1
Boeing B777-300 aircraft into its fleet in 2013
 Began more international nonstop flights, whilst
most domestic airlines provide short domestic
flights
 New seasonal summer services to key
holiday destinations: Spain, England,
Belgium, and Portugal from Charlotte, NC
 Partnership with Oneworld Airlines
 Key partners including British Airways,
Malaysia Airlines, Qatar Airways
Catalysts
 Delays in integration after merger have been or
are in the process of being solved
 Completed technology fixes to let fliers
book trips on both its American and US
Airways units
 Adding seats on some jets
 More revenue generation through addition
of fee-based services such as early boarding
and more legroom
 CEO Doug Parker expecting $1 billion in new
revenue and savings by 2015
 Significantly speedier at reaping positives
after transaction than industry comparables
such as merger between Delta and
Northwest (3 years to reach $1 billion
milestone)
 2014E annual profit at $3.5 billion (Bloomberg
analysts)
The positive synergies from the merger are likely to fully surface by 2015.
Source: Bloomberg, Wikipedia
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Industry Analysis|Company Analysis|Company Fundamentals|Charts|Competitors|Recommendation
FINAL RECOMMENDATION
Recommendation for AAL
 Positive synergies, in particular breaking the $1 billion milestone in revenue and costs synergies, are
expected to fully surface by 2015
 Hence, steady long term revenue growth to be expected during integration process
 Although AAL’s forward P/E ratio is at 7.38 which is considerably lower than its competitors, investors are
gaining more confidence in positive analysts’ estimates, and the stock’s P/E is expected to increase
 Expectations for US airlines as a whole are high for 2014 as the economy improves
 Final recommendation for AAL: BUY
Considering the positive outlooks for the US airlines industry and AAL in particular, the final recommendation is BUY.
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