Surging Earnings Estimates Signal Upside for American Airlines (AAL) Stock
American Airlines (AAL) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this world's largest airline, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
For American Airlines, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.
Current-Quarter Estimate Revisions
The company is expected to earn $0.13 per share for the current quarter, which represents a year-over-year change of -65.79%.
Over the last 30 days, five estimates have moved higher for American Airlines while one has gone lower. As a result, the Zacks Consensus Estimate has increased 43.13%.
Current-Year Estimate Revisions
The company is expected to earn $1.22 per share for the full year, which represents a change of -53.96% from the prior-year number.
There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, four estimates have moved up for American Airlines versus two negative revisions. This has pushed the consensus estimate 13.75% higher.
Favorable Zacks Rank
The promising estimate revisions have helped American Airlines earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Bottom Line
While strong estimate revisions for American Airlines have attracted decent investments and pushed the stock 9.8% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
American Airlines Group Inc. (AAL) : Free Stock Analysis Report