American Airlines (AAL) stock is down around 14% Wednesday after the air carrier cut its outlook for the second quarter and announced the departure of its chief commercial officer.
According to an 8-K filing with the Securities and Exchange Commission, American Airlines now expects total revenue per available seat mile to decline 5% to 6% in Q2, compared with its previous outlook for a drop of 1% to 3%. The company anticipates earnings per share (EPS) for the three-month period to be in the range of $1 to $1.15, compared with its prior forecast for EPS of $1.15 to $1.45.
American Airlines also announced that Vasu Raja, its executive vice president and chief commercial officer, would be leaving the company in June.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Raja devised a plan to drive direct bookings at American Airlines rather than through third-party websites and travel agencies. Raja's changes to the company's distribution strategy cut the airline's sales department and made it harder for some agencies to sell tickets on American's flights, according to CNBC. American Airlines CEO Robert Isom said the airline is weighing changes to that plan.
"We've got to put some more carrots in place and make sure that our product is available wherever customers want to buy it," Isom said at the Bernstein Strategic Decisions conference on Wednesday, as reported by CNBC.
Stephen Johnson, American Airlines' vice chair and chief strategy officer, will assume the responsibilities of the chief commercial officer position while the company searches for a replacement.
American Airlines' woes are not an industry-wide issue
The issues at American Airlines don't seem to be industry wide. Indeed, following the outlook cut by AAL, United Airlines (UAL) reiterated its outlook for the second quarter, which calls for EPS in the range of $3.75 to $4.25.
Meanwhile, Delta Air Lines (DAL), one of Kiplinger's best stocks to buy this year, expects record Q2 revenue and earnings per share to arrive between $2.20 and $2.50.
Is American Airlines stock a buy, sell or hold?
Analysts are generally bullish on the industrial stock. According to S&P Global Market Intelligence, the consensus analyst target price for AAL is $16.65, representing implied upside of roughly 45% from current levels. Additionally, the consensus recommendation is Buy.
However, these estimates may change in the days and weeks ahead following the reduced outlook.
One of those reducing their rating on AAL stock is Jefferies analyst Sheila Kahyaoglu, who downgraded the stock to Hold from Buy and lowered her price target to $12 from $17 in a note to clients.
"Guidance held on as long as it could, but it's clear AAL's long-term strategy will take some time to execute, particularly in light of its 18% Q2 EPS cut and chief commercial officer departure," Kahyaoglu said.
In a separate note, Kahyaoglu upgraded UAL to Buy from Hold, saying shares are undervalued at current levels.
Related Content
-
Trump Targets Student Loan Forgiveness: Here’s How Taxes and Repayment Could Soon ChangeStudent Loans The so-called One Big Beautiful Bill and the Trump administration’s executive action are making the future of student loan forgiveness and its tax consequences uncertain.
-
California, South Florida, Long Island, New Jersey: The Places People Are Leaving in Droves in 2025Skyrocketing costs and shifting priorities mean people are packing up and leaving some cities and states in droves, while others are flocking to more affordable or lifestyle-friendly destinations.
-
Should You Start a 'Trump Account' for Your Child?"Trump Accounts" for kids is part of the One Big, Beautiful Bill that was just signed. Look at if it's worth it for your children.
-
I'm a Financial Strategist: This Is the Investment Trap That Keeps Smart Investors on the SidelinesForget FOMO. FOGI — Fear of Getting In — is the feeling you need to learn how to manage so you don't miss out on future investment gains.
-
Can You Be a Good Parent to an Only Child When You're Also a Business Owner?Author and social psychologist Susan Newman offers advice to business-owner parents on how to raise a well-adjusted single child by avoiding overcompensation and encouraging chores.
-
How Advisers Can Steer Their Clients Through Market Volatility (and Strengthen Their Relationships)Financial advisers need to be strategic when they communicate with clients during market volatility. The goal is to not only reassure them but to also help them avoid rash decisions, deepen your relationship with them and build lasting trust.
-
Stock Market Today: President Trump Reboots the Tariff TradeA broad consensus that markets hate uncertainty more than anything else is being tested on an almost daily basis in 2025.
-
The 60-40 Portfolio Rule of Investing: Not Dead Yet?Adding alternative investments to a balanced portfolio can smooth out returns.
-
The Hidden Costs of Caregiving: Crisis Goes Well Beyond Financial IssuesMany caregivers are drained emotionally as well as financially, leading to depression, burnout and depleted retirement prospects. What's to be done?
-
Cash Balance Plans: An Expert Guide to the High Earner's Secret Weapon for RetirementCash balance plans offer business owners and high-income professionals a powerful way to significantly boost retirement savings and reduce taxes.
