Why American Airlines Stock Jumped 5% Today
What happened
Shares of American Airlines Group (NASDAQ: AAL) leapt as much as 5% higher in Tuesday trading, before settling down to book a 4.8% gain by market close.
So what
American Airlines reported its April and year-to-date traffic results earlier today. Total revenue passenger miles (RPMs) hit a record 18.6 billion in April, up 3.1% versus April 2016. Although the airline increased capacity (total seats flying) by 0.8% year over year, it increased the pace at which it put passengers in those seats even faster. The airline's passenger load factor -- the percentage of seats flying that were occupied by paying passengers -- increased to 82.2%, up 180 basis points over last April.
This marked a bit of a turnaround from results earlier this year. To date, 2017 RPMs have been down 0.3% year over year, while capacity has been down 0.6%, and the load factor is up only 0.2%.
American Airlines stock just took off. Image source: American Airlines.
Now what
In other words, while some investors might be concerned to see American Airlines adding capacity (given that more capacity increases the chance that some will go unutilized, hurting profits), so far things seem to be working out well. American is putting more planes into service and it's still filling those planes more efficiently.
This quarter, American Airlines says it could conceivably grow revenues as much as 3.5% to 5.5%, and expects to earn operating profit margins of between 12% and 14% on those revenues. This good news has the potential to inspire a rash of analyst upgrades before earnings come out.
Little wonder investors are positioning themselves to benefit if and when those upgrades materialize.
10 stocks we like better than American Airlines GroupWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and American Airlines Group wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of May 1, 2017
Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.