Credit Suisse Upgrades American Airlines (AAL) to Outperform

Credit Suisse upgraded American Airlines (NASDAQ: AAL) from Neutral to Outperform with a price target of $57.00 (from $52.00).

Analyst Julie Yates commented, "At 6.9x our taxed 2016E, we see more favorable risk/reward in 2016 than 2015. Integration challenges are largely behind & AAL might have the most control of pricing in 2016 following aggressive actions in 2015 & forthcoming IT upgrades. Competitive capacity trends are moderating, expectations are low, & the buyback is sizeable. We downgraded AAL in Jan’15 to Neutral and it was our least preferred network carrier in 2015 on competitive capacity trends, PRASM underperformance, integration risk & higher leverage/lower FCF. We are less worried about higher leverage/lower FCF given ample liquidity, low fuel & since capex has now peaked; if the bull case plays out, we don’t see these as impediments to 2016 outperformance for the stock esp. with the sizeable buyback likely to continue. LatAm remains a risk, but this is well understood and lower relative Asia exposure could be an advantage given economic concerns and ongoing competitive capacity challenges. AAL has the best EU exposure with a dominant LHR position."

The firm's top picks in airlines for 2016 are LUV, DAL, AAL, and UAL where we see 43% potential upside on average.

For an analyst ratings summary and ratings history on American Airlines click here. For more ratings news on American Airlines click here.

Shares of American Airlines closed at $41.23 yesterday.

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