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Shares of American Airlines Group Inc. rallied on Wednesday, with Citi upgrading its rating on the shares after the company tweaked its guidance for the second quarter.
American Airlines
AAL,
shares gained nearly 7% to be among the top S&P 500 index
SPX,
performers in midday trading. The stock was poised to end at its best in nearly two weeks, and it’s up nearly 36% this year, compared with gains around 17% for the S&P 500 in the same period.
American and other airline stocks also got a boost from Delta Air Lines Inc.
DAL,
second-quarter earnings showing that air carrier’s first profit since the pandemic. The U.S. Global Jets ETF
JETS,
rose nearly 1%.
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American is forecast to report a loss for the second quarter and its long-term prospect “still looks somewhat tenuous,” Citi analyst Stephen Trent wrote in a note Wednesday.
“Still, the combination of the stronger-than-expected 2Q operational guide and the shares drifting below our target price are hard to dismiss. As such, Citi upgrades the shares from sell to neutral,” he said.
Analysts polled by FactSet are expecting American to report an adjusted quarterly loss of $2.21 a share on sales of $7.3 billion.
That would compare with an adjusted loss of $7.82 a share on sales of $1.6 billion in the year-ago quarter, at the height of worldwide travel restrictions and other barriers to air travel put in place to curb the spread of COVID-19.
The airline is expected to report results on July 22 before the bell.
American late Tuesday updated investors on its quarterly numbers, suggesting “a better quarter than the street had expected,” Citi’s Trent said. Management guided for an adjusted per-share loss, excluding special credits, between $1.76 and $1.67.
The company said it expected to end the quarter with $21.3 billion in liquidity, more than $1 billion above the previous guidance thanks to improving revenue and share sales.
Operational improvements in the sector, however, have not resulted in better stock performance, Trent said. And the airlines business still faces challenges related to labor-cost inflation and higher fuel prices.
“Looking beyond the summer travel season, September appears to be a proving ground, as it should provide some indication on the lasting power of the demand recovery,” he said.
