By Mary Schlangenstein
Bloomberg
American Airlines Group Inc. tumbled to its lowest price in more than a year after an analyst cut its stock rating and trimmed earnings estimates for the industry, citing recent terrorist attacks, higher fuel prices and the coming U.K. vote on leaving the European Union.
American dropped 4.4 percent to $29.14 at Thursday’s market close, its lowest intraday price since October 2014.
American’s rating was cut to underperform from neutral by Bank of America Merrill Lynch analyst Andrew Didora on Thursday, in part because of increasing debt. American, the world’s largest airline, will represent more than 50 percent of the U.S. industry’s net debt by the end of 2016, he said. Rival carriers are reducing borrowing. Merrill Lynch cut its price target for American to $27 from $42.
Rising capacity, combined with stagnant revenue from each seat flown a mile, means airlines are ill prepared to deal with events that might reduce travel demand, like the attack on nightclub patrons in Orlando and the possibility that Britain will leave the EU, Didora said.
He cut his average estimate for industry earnings per share by 7 percent for this year and 13 percent for 2017.
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