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US Airways Group Inc (NYSE:LCC) Stock Upgraded From Neutral to Overweight: AMR Corporation (OTCMKTS:AAMRQ)

Written by on September 18, 2013

AMR Corporation (OTCMKTS:AAMRQ)’s shares have declined 2.1% to $3.73, while US Airways Group Inc (NYSE:LCC) has added 3.2% to $18.64. The Department of Justice surprised the airline industry when it litigated to block the merger of US Airways Group Inc (NYSE:LCC) and AAMRQ, causing the stocks of both companies to plunge.

JPMorgan’s Jamie Baker and Mark Streeter think that the odds are even that the two airlines prevail in court. They wrote that the industry dialogue has buildup, with airlines, pundits, bloggers, former CEOs, etc, all extolled the idiocy of DOJ’s suit and conviction of an airline win, with almost 75% probability. However, considering the antitrust experts, no one is found to believe that the airlines face anything but a steep, uphill battle, with most citing probabilities below 40%. They concurred with the former, but did not reject the latter, so they called it 50/50.

U.S. Airways has worth taken from the analysts who upgraded its stock from Neutral to Overweight. Baker and Streeter explained the reason for the upgrade. They said Delta Air Lines, Inc (NYSE:DAL) is trading at almost 10x 2014E earnings, LCC at 5x. Delta traded at a 16% premium on EV/EBITDAR. Granted, it is installing capital to shareholders, tied to the S&P 500, and seems to hold fussy appeal for first-time airline investors. They obtained all that. However, LCC generates money, consensus seems low, and regarding their view the market’s inclination to depict it as a handicapped network wannabe is highly misguided. They have increased their price objective from $18 to $26 and upgraded the company’s stock from Neutral to Overweight. Delta has also upgraded to Overweight by analysts as well.

Delta has added 0.2% to $23.20 and Alaska Air Group, Inc. (NYSE:ALK) has advance 0.9% to $62.17.  Southwest Airlines Co. (NYSE:LUV) has gained 0.6% to $14.19. AMR Corporation (OTCMKTS:AAMRQ) shares in last session closed at $3.77. US Airways Group Inc (NYSE:LCC) shares were off -0.11% to $18.70 in premarket.

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