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American Airlines (AAL) Stock Declines 18% YTD: Here’s Why


Shares of American Airlines Group Inc. AAL have lost 17.5% so far this year, underperforming its industry's decline of 11.8%.

YTD Price Performance

Reasons Behind the Lackluster Price Performance

High fuel costs have been the primary reason behind the company’s dismal performance.In fact, oil prices have increased roughly 10% on a year-to-date basis.

In the second quarter, high fuel costs are expected to limit bottom-line growth at American Airlines as was the case in first-quarter 2018. Average fuel price per gallon rose 23.6% year over year to $2.10 per gallon in the first quarter. Fuel prices are anticipated to be even higher (between $2.18 and $2.23 per gallon) in the second quarter.

Apart from high fuel costs, expenses pertaining to labor are expected to weigh on the bottom line in the second quarter. Consolidated cost per available seat miles (excluding special items and fuel) is anticipated to increase 3.5% in the second quarter of 2018.

American Airlines’ high debt levels are added concerns. Apart from American Airlines, the rise in oil prices has also hurt other airline operators like Southwest Airlines Co. LUV, Delta Air Lines, Inc. DAL and United Continental Holdings, Inc. UAL.

Other Unfavorable Readings

The Zacks Consensus Estimate for second-quarter and full-year 2018 earnings moved south 8.5% and 7.9%, respectively, in the last 60 days. This reflects investor’s pessimism surrounding the stock.

Furthermore, the company’s Momentum Score of D highlights its short-term unattractiveness. Undoubtedly, the above negatives substantiate the company’s Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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