Here's Why Investors Should Give American Airlines Stock a Miss Now

American Airlines’ AAL top line is grappling with a downturn in demand and the drawbacks of the American Eagle Flight 5342 incident. Weak liquidity and escalated operating expenses also put a strain on the company’s prospects, making it an unattractive choice for investors’ portfolios.

Let’s delve deeper.

AAL: Key Risks to Watch

Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-year earnings has moved 21.4% south in the past 60 days. For the next year, the consensus mark for earnings has been revised 44.1% downward in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.

Dim Price Performance:  The company’s price trend reveals that its shares have dropped 32.1% year to date compared with the Transportation - Airline industry’s 3.3% fall.

Weak Zacks Rank: American Airlines currently carries a Zacks Rank #5 (Strong Sell).

Headwinds: The downturn in demand for American Airlines has significantly impacted the company’s performance, resulting in a 0.2% year-over-year decline in the top line for the first quarter of 2025. Economic uncertainty, which weighed heavily on domestic leisure travel, along with the tragic accident involving American Eagle Flight 5342 on Jan. 29, 2025, played a major role in driving this decline.

American Airlines’ financial stability is challenged by elevated expenses and weak liquidity. In the first quarter of 2025, the total operating expenses rose to $12.82 billion as compared with $12.56 billion in the March-end quarter of 2024. Moreover, AAL exited the quarter with a current ratio (a measure of liquidity) of 0.52. A current ratio of less than 1 is undesirable as it indicates that the company does not hold sufficient cash to meet its short-term obligations.Bottom of Form

Stocks to Consider

Investors interested in the Transportation sector may consider Copa Holdings CPA and Ryanair RYAAY.

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

CPA has an expected earnings growth rate of 14.3% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 5.5%. Shares of CPA have risen 22.8% year to date.

RYAAY currently carries a Zacks Rank of #2 (Buy).

RYAAY has an expected earnings growth rate of 30.5% for the current year. The company has a mixed earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, delivering an average beat of 46.6%. Shares of RYAAY have rallied 32.6% year to date.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research