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AUGUST 29, 2011, 3:13 PM ET
AMR Has Some Gas Left in the Tank: Upgraded to Neutral
Pfizer, Bristol-Myers Gain as Blood Thinner Results ImpressAnalysts Think Retailers Mostly Persevered Through Irene
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By Avi Salzman
Ticonderoga Securities analyst James Higgins raised his rating on AMR (AMR), the parent company of American Airlines, to Neutral from Sell today as he believes the stock is unlikely to fall much farther. AMR stock is down below $4 and a bigger drop would presage talk of Chapter 11 bankruptcy, which Higgins thinks is unlikely.
“In our view, there are far better opportunities in this beaten-down group, but with ample cash and a scant $1.1 billion in equity market value representing only 6% of adjusted enterprise value, we believe the reward/risk outlook for the shares is close to even.”
Huggins also thinks AMR’s decision to buy 460 new Boeing (BA) 737 planes is a good one because it will make the fleet much more fuel efficient and lead to lower maintenance costs.
To be sure, AMR is not an overlooked gem — the company’s results have been just short of abysmal lately. Also, AMR has much higher labor costs than other airlines and will probably grow capacity in coming months while other airlines cut capacity, Huggins writes.
“Yet, the stock has been by far the weakest performer in the group (which is indeed saying something) having fallen 58% so far this year versus a 32% drop in the Amex Airline Index and mere 6% lower S&P 500. We believe there is a price for everything and, absent insolvency, view AMR shares at about $3 as having reached valuational equilibrium.”
Shares rose 7.4% to $3.50.
AUGUST 29, 2011, 3:13 PM ET
AMR Has Some Gas Left in the Tank: Upgraded to Neutral
Pfizer, Bristol-Myers Gain as Blood Thinner Results ImpressAnalysts Think Retailers Mostly Persevered Through Irene
EMAILPRINTPERMALINK
YAHOO! BUZZ
STUMBLEUPON
DIGG
FARK
MYSPACE
DEL.ICIO.US
Text Size
By Avi Salzman
Ticonderoga Securities analyst James Higgins raised his rating on AMR (AMR), the parent company of American Airlines, to Neutral from Sell today as he believes the stock is unlikely to fall much farther. AMR stock is down below $4 and a bigger drop would presage talk of Chapter 11 bankruptcy, which Higgins thinks is unlikely.
“In our view, there are far better opportunities in this beaten-down group, but with ample cash and a scant $1.1 billion in equity market value representing only 6% of adjusted enterprise value, we believe the reward/risk outlook for the shares is close to even.”
Huggins also thinks AMR’s decision to buy 460 new Boeing (BA) 737 planes is a good one because it will make the fleet much more fuel efficient and lead to lower maintenance costs.
To be sure, AMR is not an overlooked gem — the company’s results have been just short of abysmal lately. Also, AMR has much higher labor costs than other airlines and will probably grow capacity in coming months while other airlines cut capacity, Huggins writes.
“Yet, the stock has been by far the weakest performer in the group (which is indeed saying something) having fallen 58% so far this year versus a 32% drop in the Amex Airline Index and mere 6% lower S&P 500. We believe there is a price for everything and, absent insolvency, view AMR shares at about $3 as having reached valuational equilibrium.”
Shares rose 7.4% to $3.50.
