Airlines to Benefit from Weight-Loss Drugs, EPS Expected to Rise by 4%
Written by Emily J. Thompson, Senior Investment Analyst
Source: CNBC
- Impact of Weight-Loss Drugs: With the first GLP-1 weight-loss drug now available in pill form, analysts predict widespread adoption could lower airlines' fuel costs, thereby enhancing profitability.
- Fuel Cost Savings: Jefferies notes that a 10% reduction in average passenger weight could lead to a 2% decrease in total aircraft weight, resulting in a 1.5% reduction in fuel costs and an expected 4% increase in earnings per share.
- Major Airlines Benefit: American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines are projected to consume about 16 billion gallons of fuel in 2026, with fuel expenses nearing $39 billion, accounting for 19% of total operating costs.
- Operational Efficiency Gains: Assuming a 2% decline in passenger weight could yield approximately 4% growth in earnings per share, with potential increases of 11.7% for American Airlines, 3.5% for United, 4.2% for Southwest, and 2.8% for Delta.
Analyst Views on AAL
Wall Street analysts forecast AAL stock price to fall over the next 12 months. According to Wall Street analysts, the average 1-year price target for AAL is 15.00 USD with a low forecast of 10.00 USD and a high forecast of 20.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
13 Analyst Rating
5 Buy
7 Hold
1 Sell
Moderate Buy
Current: 15.140
Low
10.00
Averages
15.00
High
20.00
Current: 15.140
Low
10.00
Averages
15.00
High
20.00
About AAL
American Airlines Group Inc. is a holding company. Its primary business activity is the operation of a major network air carrier, providing scheduled air transportation for passengers and cargo through its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C. and partner gateways, including in London, Doha, Madrid, Seattle/Tacoma, Sydney and Tokyo, among others. Together with its regional airline subsidiaries and third-party regional carriers operating as American Eagle. Its cargo division provides a wide range of freight and mail services, with facilities and interline connections available across the globe. It operates approximately 977 mainline aircraft supported by its regional airline subsidiaries and third-party regional carriers, which together operate an additional 585 regional aircraft. Its subsidiaries include American Airlines, Inc., Envoy Aviation Group Inc., PSA Airlines, Inc. and Piedmont Airlines, Inc.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
