BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUSINESS DESCRIPTION American Airlines Group Inc., through its subsidiaries, operates as a network air carrier. It provides scheduled air transportation services for passengers and cargo. As of December 31, 2016, the company operated a mainline fleet of 930 aircraft. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 13.92 8.72 1.33 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 2.68 3.43 1.29 Net Income -15.34-65.60 90.07 EPS -8.58-57.79 39.36 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 49.39 26.56 13.41 Q3 2016 129.08 39.30 11.79 Q3 2015 130.94 43.72 12.91 Sector: Industrials Sub-Industry: Airlines Source: S&P BUY BUY RATING SINCE 11/01/2016 TARGET PRICE $65.31 Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY HOLD BUY Volume in Millions 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History TARGET PRICE $65.31 70 65 60 55 50 45 40 35 30 25 100 50 0 P/E COMPARISON RECOMMENDATION We rate () a BUY. This is driven by several positive factors, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year and notable return on equity. We feel its strengths outweigh the fact that the company has had somewhat growth in earnings per share. 12.85 15.96 Ind Avg 25.45 S&P 500 HIGHLIGHTS Despite its growing revenue, the company underperformed as compared with the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 2.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. EPS ANALYSIS¹ ($) Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year. Q1 1.30 Q2 2.41 Q3 2.49 2015 Q4 5.09 Q1 1.14 Q2 1.68 Q3 1.40 2016 NA = not available NM = not meaningful Q4 0.56 Q1 0.46 Q2 1.63 Q3 1.28 2017 1 Compustat fiscal year convention is used for all fundamental data items. Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major ness within the corporation. Compared to other companies in the Airlines industry and the overall market, 's return on equity significantly exceeds that of both the industry average and the S&P 500. The gross profit margin for is currently lower than what is desirable, coming in at 33.86%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.73% trails that of the industry average. Net operating cash flow has significantly decreased to $369.00 million or 65.31% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower. Report Date: PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) 0% 30% SAVE UNFAVORABLE ALK CPA LTM JBLU UAL 15% DAL SKYW LUV EBITDA Margin (TTM) FAVORABLE RYAAY 50% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $2.7 Billion and $37.7 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) 0% 30% UNFAVORABLE -6% SKYW Earnings Yield (TTM) CPA ALK FAVORABLE SAVE LTM JBLU LUV RYAAY DAL UAL 12% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between 1.3% and 29.6%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS The airline industry is comprised of companies engaged in air transportation of passengers and cargo. The major players can be classified in three broad categories: international, domestic, and regional carriers. Major airlines also provide aircraft maintenance, training, and repair services to other airlines. Customers can purchase individual seats or charter an entire aircraft for one way or round-trip travel. Some of the largest publically traded companies in this industry include Ryanair Holdings (RYAAY), Delta Air Lines (DAL), Southwest Airlines (LUV), United Continental Holdings (UAL), Alaska Air Group (ALK), JetBlue Airways (JBLU), and SkyWest (SKYW). National security risks and global terrorism are factors that affect industry operations. Rapid globalization, declining trade barriers and a growing mobile workforce are the primary drivers of industry growth. Mature markets such as Europe and North America offer little pricing power to companies. By increasing fees on services that used to be included in a ticket price, companies are supplementing revenue while competing on underlying ticket prices with the discount air carriers. One of the fees bringing in the largest revenue boost is from checked baggage. Other fees include charges for changing tickets, selecting specific seats, buying in-flight meals, bringing on a carry-on bag, pre-boarding with children, selecting seats with extra leg room, in-flight entertainment, Wi-Fi, and even a fee on some international flights to allow your baby to sit on your lap. International growth through acquisitions, joint ventures and alliances is the norm and is often crucial to the survival of airline companies as they link their flight booking systems to coordinate one-stop flight shopping. While more moderate of late, past fluctuations in fuel prices have added uncertainty to costs and profitability. Moreover, elevated fuel prices accelerate airplane retirements and accentuate the value of operating efficiencies that newer airplanes, like the Boeing Dreamliner. Growing realization of cargo s revenue potential is spurring passenger carriers to increase their focus on the cargo segment. In fact, some major Asian carriers already generate a majority of their revenues from cargo. Looking ahead, an improving US economy is tempered by unpredictable fuel prices and resultant surcharges that continue to inhibit profitability. Travelers may look at more economical transportation alternatives, like high gas mileage automobiles, which could lead to constriction of passenger revenue per available seat mile, a benchmark statistic for passenger airlines. PEER GROUP: Airlines Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) AMERICAN AIRLINES GROUP I 50.49 24,159 12.85 41,395.00 1,950.00 ALK ALASKA AIR GROUP INC 69.17 8,511 11.10 7,495.00 775.00 LTM LATAM AIRLINES GROUP SA 12.65 7,671 52.71 9,965.53 142.49 JBLU JETBLUE AIRWAYS CORP 21.47 6,884 11.07 6,900.00 647.00 CPA COPA HOLDINGS SA 134.19 4,185 15.81 2,453.28 359.65 DAL DELTA AIR LINES INC 52.92 37,731 10.63 40,457.00 3,627.00 LUV SOUTHWEST AIRLINES 60.67 36,001 17.43 20,972.00 2,122.00 SAVE SPIRIT AIRLINES INC 42.63 2,957 13.53 2,559.01 218.76 RYAAY RYANAIR HOLDINGS PLC 121.94 28,848 18.23 7,696.44 1,622.43 SKYW SKYWEST INC 52.05 2,698 NM 3,165.13-131.27 UAL UNITED CONTINENTAL HLDGS INC 63.32 18,759 9.97 37,350.00 1,948.00 The peer group comparison is based on Major Airlines companies of comparable size. Report Date: PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION American Airlines Group Inc., through its subsidiaries, operates as a network air carrier. It provides scheduled air transportation services for passengers and cargo. As of December 31, 2016, the company operated a mainline fleet of 930 aircraft. It serves 350 destinations in approximately 50 countries, principally from its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, and Phoenix, as well as in Washington, D.C. The company was formerly known as AMR Corporation and changed its name to American Airlines Group Inc. in December 2013. American Airlines Group Inc. was founded in 1934 and is headquartered in Fort Worth, Texas. STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 3.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 50% of the stocks we rate. 4333 Amon Carter Boulevard Fort Worth, TX 76155 USA Phone: 817-963-1234 http://www.aa.com Employees: 122000 Total Return 2.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 40% of the companies we cover. Efficiency 4.5 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 80% of the companies we review. Price volatility 3.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 60% of the stocks we monitor. Solvency 2.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 30% of the companies we analyze. Income 3.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 50% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. Report Date: PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.71 Q4 FY17 4.64 E 2017(E) 4.95 E 2018(E) INCOME STATEMENT Net Sales ($mil) 10,877.00 10,593.00 EBITDA ($mil) 1,850.00 2,201.00 EBIT ($mil) 1,339.00 1,724.00 Net Income ($mil) 624.00 737.00 FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 has decreased when compared to the same period a year ago. Even though sales increased, the net income has decreased. has liquidity. Currently, the Quick Ratio is 0.51 which shows a lack of ability to cover short-term cash needs. The liquidity decreased from the same period a year ago, despite already having liquidity to begin with. This would indicate deteriorating cash flow. During the same period, stockholders' equity ("net worth") has decreased by 10.08% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 6,161.00 7,390.00 Total Assets ($mil) 52,401.00 51,108.00 Total Debt ($mil) 24,684.00 23,343.00 Equity ($mil) 3,948.00 4,391.00 PROFITABILITY Gross Profit Margin 33.86% 37.13% EBITDA Margin 17.00% 20.77% Operating Margin 12.31% 16.27% Sales Turnover 0.79 0.78 Return on Assets 3.72% 11.09% Return on Equity 49.39% 129.08% DEBT Current Ratio 0.65 0.76 Debt/Capital 0.86 0.84 Interest Expense 278.00 261.00 Interest Coverage 4.82 6.61 SHARE DATA Shares outstanding (mil) 480 519 Div / share 0.10 0.10 EPS 1.28 1.40 Book value / share 8.23 8.46 Institutional Own % NA NA Avg Daily Volume 5,117,938 5,623,027 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. Report Date: PAGE 4
RATINGS HISTORY Our rating for has not changed since 11/1/2016. As of 11/30/2017, the stock was trading at a price of which is 7.3% below its 52-week high of $54.48 and 28.8% above its 52-week low of $39.21. 2 Year Chart BUY: $44.55 HOLD: $34.43 2016 BUY: $39.80 $60 $50 $40 $30 MOST RECENT RATINGS CHANGES Date Price Action From To 11/1/16 $39.80 Upgrade Hold Buy 5/2/16 $34.43 Downgrade Buy Hold 12/8/15 $44.55 Upgrade Hold Buy 11/30/15 $41.26 No Change Hold Hold Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/30/2017) 44.19% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.85% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 24.96% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. This stock's P/E ratio indicates a discount compared to an average of 15.96 for the Airlines industry and a significant discount compared to the S&P 500 average of 25.45. For additional comparison, its price-to-book ratio of 6.14 indicates a significant premium versus the S&P 500 average of 3.24 and a significant premium versus the industry average of 3.58. The price-to-sales ratio is well below both the S&P 500 average and the industry average, indicating a discount. The valuation analysis reveals that, seems to be trading at a discount to investment alternatives within the industry. Price/Earnings 12.85 Peers 15.96 Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. is trading at a discount to its peers. Price/Projected Earnings 10.20 Peers 15.14 Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations. is trading at a significant discount to its peers. Price/Book 6.14 Peers 3.58 Premium. A higher price-to-book ratio makes a stock less attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant premium to its peers. Price/Sales 0.59 Peers 1.46 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a significant discount to its industry on this measurement. DISCLAIMER: Price/CashFlow 4.82 Peers 8.22 Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a significant discount to its peers. Price to Earnings/Growth NM Peers 51.72 Neutral. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. 's negative PEG ratio makes this valuation measure meaningless. Earnings Growth lower higher -57.79 Peers -11.89 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 3.43 Peers 4.54 Lower. A sales growth rate that trails the industry implies that a company is losing market share. trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. Report Date: PAGE 5