American Airlines
Over the past 12 months, American Airlines Group Inc. (NASDAQ: AAL) has seen its share price decline by about 35.3%. Rivals United and Delta have posted 12-month losses of 15.8% and 22.8%, respectively, as a recovery in demand faltered, and investors have decided to wait to see what happens. Earlier this month, American upgraded its profit estimate, but the results still fell short of analysts’ expectations. The airline also forecast total revenue per available seat mile to rise, but some of that is likely to be lost to higher costs.
Analysts remain extremely cautious. Of 21 brokerages covering the stock, 15 have a Hold rating and four have Buy or Strong Buy ratings. At a share price of around $13.00, the upside potential based on a median price target of $17.00 is 30.8%. At the high target of $26.00, the upside potential is 50%.
First-quarter revenue is forecast at $12.21 billion, down 7.4% sequentially but up 37.2% year over year. American is expected to post adjusted EPS of $0.03, down 97.6% sequentially and much better than last year’s first-quarter loss of $2.32 per share. For the full 2023 fiscal year, the company is expected to post EPS of $2.35, up 370%, on revenue of $53.16 billion, up 8.6%.
American stock trades at 5.5 times expected 2023 earnings, 4.2 times estimated 2024 earnings of $3.08 and 2.8 times estimated 2025 earnings of $4.55 per share. The stock’s 52-week range is $11.65 to $20.15. The company does not pay a dividend. Its total return for the past 12 months was negative 35.88%.
Merck
Dow component Merck & Co. Inc. (NYSE: MRK) has added about 37% to its stock price over the past 12 months. The shares have recovered from a recent dip following Merck’s announced $10.8 billion acquisition of Prometheus Biotech. Last week, Merck and Moderna reported a study showing that users of Merck’s Keytruda along with Moderna’s cancer vaccine stayed cancer-free for 18 months longer than did Keytruda-only patients. The two firms are planning to begin a phase 3 study later this year.
Analysts have gotten more bullish on Merck stock in the past few months. Of 29 brokerages covering Merck, 20 have a Buy or Strong Buy rating and eight more have Hold ratings. At a share price of around $117.00, the implied upside on the stock is 7.3% at a consensus 12-month price target of $125.50. At the high target of $155.00, upside potential rises to 32.5%.
For the first quarter, Merck is expected to report sales of $13.81 billion, down 0.2% sequentially and by 13.1% year over year. Adjusted EPS are expected to reach $1.36, down 16.1% sequentially and by 36.4% year over year. For the 2022 fiscal year, EPS are forecast at $6.87, a decrease of 8.1% year over year, on sales of $58.28 billion, a decline of 1.7%.
Merck stock trades at 17.0 times expected 2023 EPS, 13.9 times estimated 2024 earnings of $8.40 and 12.4 times estimated 2025 earnings of $9.43 per share. The stock’s 52-week range is $83.05 to $116.81, and the company pays an annual dividend of $2.92 (yield of 2.53%). Total return over the past 12 months was 41.99%.
Originally published at 24/7 Wall St.
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