American Airlines beat on its EPS estimates, but could be hitting resistance
American Airlines (NYSE: AAL) reported earnings on October 24 and the company beat on the top line, but missed on the bottom line. Analysts expected the company to report earnings per share of $1.38 and the actual number was $1.42. The company came up a little short on its revenue estimate, reporting $11.01 billion and the estimate was for $11.94 billion. The company cited low fuel costs as one reason for the earnings growth. The stock jumped 3.96% after the report.
Despite the optimistic report, the stock could face some headwinds in the coming weeks as there is potential resistance from two different sources just overhead. First, the stock has been trending lower over the last year and a trend channel has formed to define the different cycles over the past year. The upper rail of the channel is right at the $30 mark.
The second potential source of resistance is the 52-week moving average which is at $31.80 currently. The stock hasn’t closed above the trend line since March 2018.
In addition to the potential resistance, the daily stochastic readings are in overbought territory and have been for nine days now. There was also a bearish signal generated by the Tickeron Trend Prediction Engine on October 23. The signal showed a confidence level of 83% and past predictions have been successful 78% of the time. The signal calls for a decline of at least 4% within the next month.
From a fundamental perspective, American Airlines has struggled in recent years. The company has seen earnings decline by 15% per year over the last three years while sales have increased by only 5%. It also has a low profit margin at 6.3%.
Looking at Tickeron’s Fundamental Analysis Overview, the PE Growth Rating is 72 and that points to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents. A rating of 1 indicates highest PE growth while a rating of 100 indicates lowest PE growth.
The Tickeron Price Growth Rating for American Airlines is 83, indicating slightly worse than average price growth. AAL’s price has grown at a lower rate over the last 12 months compared to S&P 500 index constituents. A rating of 1 points to highest price growth (largest percent return) while a rating of 100 points to lowest price growth (smallest percent return).
Finally, the Tickeron Profit vs. Risk Rating for American is 100, indicating that the returns do not compensate for the risks. Unstable profits reported over time resulted in significant drawdowns within the last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating for the industry is 73, placing this stock worse than average.
Sentiment toward American Airlines is a little more pessimistic than the average stock, but that is to be expected when a stock has been trending lower and when the company has seen earnings decline. There are 21 analysts covering the stock at this time with 11 “buy” ratings, eight “hold” ratings, and two “sell” ratings. This puts the buy percentage at 52.4%, below the average range of 65% to 75%.
The short interest ratio is 3.7 currently and that is slightly higher than the average around the 3.0 mark. The number of shares sold short did jump by 1.75 million in the most recent reporting period.
AAL sees its Stochastic Oscillator ascends from oversold territory
On December 23, 2024, the Stochastic Oscillator for AAL moved out of oversold territory and this could be a bullish sign for the stock. Traders may want to buy the stock or buy call options. Tickeron's A.I.dvisor looked at 65 instances where the indicator left the oversold zone. In of the 65 cases the stock moved higher in the following days. This puts the odds of a move higher at over .
Technical Analysis (Indicators)
Bullish Trend Analysis
The 50-day moving average for AAL moved above the 200-day moving average on November 22, 2024. This could be a long-term bullish signal for the stock as the stock shifts to an upward trend.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where AAL advanced for three days, in of 283 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 206 cases where AAL Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Bearish Trend Analysis
The 10-day RSI Indicator for AAL moved out of overbought territory on December 13, 2024. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 22 similar instances where the indicator moved out of overbought territory. In of the 22 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Momentum Indicator moved below the 0 level on December 24, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on AAL as a result. In of 91 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for AAL turned negative on December 18, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 47 similar instances when the indicator turned negative. In of the 47 cases the stock turned lower in the days that followed. This puts the odds of success at .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where AAL declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
AAL broke above its upper Bollinger Band on December 05, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. AAL’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (0.000) is normal, around the industry mean (3.830). P/E Ratio (41.310) is within average values for comparable stocks, (41.609). Projected Growth (PEG Ratio) (0.211) is also within normal values, averaging (0.866). AAL has a moderately low Dividend Yield (0.000) as compared to the industry average of (0.038). P/S Ratio (0.218) is also within normal values, averaging (1.420).
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. AAL’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 93, placing this stock worse than average.
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Fundamental Analysis Ratings
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General Information
a provider of air transportation services for passengers and cargo
Industry Airlines