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American Airlines shares were down nearly 8% in premarket
trading on Wednesday, dragging peers Delta Air, Southwest
Airlines and United Airlines, which all fell between 1.5% and
2.5%.
The Fort Worth, Texas-based company revised its forecast on
Tuesday and now expects second-quarter adjusted earnings in the
range of $1.00 to $1.15 per share, compared to previous
expectations of $1.15 to $1.45 per share.
The carrier has made a strategic shift away from lucrative
corporate travel in a bid to grow its market share in smaller
markets. However, excess capacity in such markets has been
hurting its pricing power.
"It is clearer now (and in short order) that the strategy has
not gone as planned," Jefferies analysts wrote in a note while
downgrading the stock to "hold".
Jefferies had upgraded American earlier this year for its
defensive cost control said "thesis drift began" following the
analyst day.
The forecast cut comes just after the Memorial Day weekend,
considered to be the beginning of the U.S. summer travel season
- the most profitable season for airlines
"A significant miss driven in part by close in bookings puts
AAL’s ability to reap the full value of a robust summer flying
season in greater doubt," Bernstein analyst David Vernon said in
a research note.
Shares of American trade about 4.89 times their forward profit
estimates, below the industry multiple of 7.16.
Rival United Airlines, which was also trading down 1.7% before
the bell, on Tuesday reaffirmed its second-quarter earnings
forecast of $3.75-$4.25 per share.
(Reporting by Pratyush Thakur in Bengaluru; Editing by Tasim
Zahid)
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