Shares of American Airlines Group Inc. (AAL, Financial) took a dive after the release of its fourth-quarter earnings report.
Early market trading showed the stock price was at $52.88 per share, down by 3.78%. Since late October, the stock price has risen by 9%.
The drop in stock price came just as the company was announcing it was returning $1.7 billion to shareholders in 2017, which includes the repurchase of 33.9 million shares and dividend payments of $198 million.
The company posted earnings per share of 95 cents excluding net special items. Analysts were predicting 92 cents a share. (The amounts do not reflect GAAP standards.)
Earnings for the year came in at $3.90 per share. The per-share amount was $4.88 when excluding net special items.
Total operating revenues for the quarter came in at $10.6 billion. That compared to $9.8 billion in the prior-year quarter.
Expenses for the quarter were at $9.9 billion compared to $9 billion for the same period a year ago.
The net operating income was $690 million compared to $767 million in the fourth quarter of 2016.
For 2017, the company reported operating income of $4 billion compared to $5.3 billion in 2016. The amounts reflect GAAP standards.
Investment gurus, including Bill Nygren (Trades, Portfolio), have signaled the airline’s stock has become increasingly attractive. Earlier this month, Nygren said, as a rule, airline stocks historically have been unattractive long-term investments. But he believes the company’s management team has been making wiser decisions about capacity additions and capital allocations.
Nygren says: “American Airlines’ CEO Doug Parker sees substantial opportunity to grow value as the company completes the US Airways merger integration. He is improving the company’s culture and restoring credibility with employees. Parker believes that American Airlines has around $5 billion of pretax earnings power, which is up 50% from our 2017 estimate, and he has bought back 37% of the company’s shares since the merger closed. With the stock selling for a single-digit multiple of normal earnings power, we believe American Airlines is an attractive investment.”
GuruFocus indicators
The company has a market cap of $26.22 billion.
GuruFocus indicators show the company is ranked 4 out of 10 in financial strength and in profitability and growth.
The company has a price-earnings (P/E) ratio of 13.77 with a median of 11.58. Its price-book (P/B) ratio is 6.66, which is far lower than the industry median of 1.82.
Its price-sales (P/S) ratio is 0.66 versus the median of 0.78.
According to the Peter Lynch chart, the stock is just slightly undervalued. The median is $59.20.
