Investing.com — Bernstein analysts raised American Airways (NASDAQ:) to Outperform from Market-Carry out on Tuesday, highlighting a mixture of an improved trade backdrop and a brand new co-branded bank card deal that guarantees to generate important money move.
The agency additionally elevated its worth goal for the inventory to $24 from $14, reflecting the airline’s improved monetary prospects.
“The pricing and revenue environment has continued to improve,” Bernstein wrote, with American Airways rising its fourth-quarter 2024 earnings steerage by 73%, now anticipating earnings per share within the vary of $0.55-$0.75.
Decrease gasoline prices and stronger pricing are key drivers of the up to date outlook.
The analysts additionally pointed to American Airways’ not too long ago introduced unique co-branded bank card partnership with Citi, which is able to start in January 2026.
The deal is predicted to spice up annual remuneration from bank card and different partnerships by 10% from 2024 ranges, with projected income approaching $10 billion.
Based on Bernstein, this might translate into a further $1.5 billion in pre-tax revenue in comparison with 2024.
The brand new, regular income stream is claimed to deal with a significant critique of the airline: its excessive leverage.
Bernstein estimates the terminal worth of the bank card deal at roughly $12 billion, which “changes the story for an airline critiqued for its high leverage.”
The analysts consider the deal will allow American Airways to pay down debt extra successfully, considerably enhancing its monetary outlook.
Whereas challenges in company and company income restoration are anticipated to persist by way of the tip of 2025, Bernstein sees the constant money move from the bank card partnership as transformative.
This growth strikes Bernstein to consider American Airways is “closer to a have than a have-not,” solidifying its place as a extra strong competitor within the airline trade.
