Imperial Capital: American Airlines To See Record Q4, Earnings Growth In 2015

Bob McAdoo of Imperial Capital on Monday commented that American Airlines Group Inc (NYSE: AAL) remains a top pick in the sector and the company will continue to benefit from favorable trends.

“American Airlines Group operating results have and will likely continue to benefit from strong industry fundamentals, structural changes to legacy AMR, and merger-related synergies,” McAdoo wrote. However, the analyst adds that what will be even more impactful to the company's 2015 results will be the “substantial” decline in jet fuel.

McAdoo notes that the earnings impact of the decline in fuel prices does not appear to be included in the current 2015 consensus estimates and that in the coming weeks, the Street will likely “reset” its earnings expectations.

American Airlines released its December traffic report and final 2014 investor update on Monday. The company stated that it expects fourth quarter passenger RASM (Revenue Per Available Seat Mile) to be flat to down 2 percent from the previous year's level.

Accordingly, McAdoo is lowering his fourth quarter earnings per share estimate to $1.50 from a previous $1.56 and expects the company to see revenue of $10.151 billion, down from prior estimates of $10.226 billion.

Share are Outperform rated with a $92 price target.