RE:RE:GG or any other experts, help please... TARGET PRICE Was at $8.50. Now $9
Recent Update Text as of 16MAY14
. AC reported an in-line Q1.
. We made very minor changes to our estimates as we adjusted our earnings model
post the quarter. We are looking for 4% reduction in CASM (ex-fuel) and 1% fall
in RASM during 2014 (see Exhibit 1). Potential RASM degradation due to capacity
increases remains the key risk in the AC story over the next year. That said,
traffic levels were solid in April and management comments on summer traffic
were also encouraging. We also believe that there may be room for AC to wring
out further CASM improvement.
. We believe that keeping the E-190s is a prudent move and we wouldn't be
surprised, if in the next labor negotiation, there may be an attempt to move
these aircraft to a CPA player like Sky Regional. Doing this would further
improve the profitability of this fleet. Although the $300M bill for
refurbishing the 777 fleet is steep, standardizing the wide-body fleet makes
sense from a customer/branding perspective.
. We are maintaining our SO rating and the TP is raised to $9 due to a
roll-forward in our valuation period by one quarter. At current levels, AC is
trading at 4.4x EV/2015 EBITDAR which is at 1x discount to its US comp group. We
believe that further upside for the shares could come from higher estimates (due
to better CASM) as well as continued expansion in global airlines multiples.
kingnick311 wrote: Def not an expert, but...
It hasn't fallen off a cliff, so you hold. I listened to the analyst conference call and anaysts and managment sounded positive, as the earnings were basically inline with expectations. Tread water today until the analyst ratings come out, I expect them to be positive, boosting the stock. I am not expecting it to pop, but it looks like the market is reacting reasonably, when it could have taken a nose dive knowing AC investors.