The airlines industry has often been regarded as the worst performing of all US industries. However, over the past several years – owing to increased efficiency and lower fuel prices – the airlines industry has come roaring back. In terms of the ACSI (American Customer Satisfaction Index), the airline industry was ranked marginally ahead of ISPs (Internet Service Providers) in 2013, but now the industry is regarded in a better light.

This bodes well for investors in companies like Delta Airlines (DAL), United, American Airlines (UAL), Hawaiian Holdings Inc. (HA), JetBlue (JBLU), Virgin America a.k.a. Alaska Airlines (ALK), and others. The data on airline performance is collected from consumer satisfaction polls. Of the top 10 US airlines, several factors were considered when evaluating performance and preference. This is what the Points Guy study concluded:

• Convenience and price was weighted 35% of the overall ranking of airlines
• Difficulties experienced with the airline accounted for 17% of the overall ranking
• Additional issues accounted for 13% of the total rating

Based on the ratings in the Points Guy poll, American Airlines (AAL) ranked first in route network, and fifth overall. The top-ranking US airline is Alaska Airline, thanks to its top overall performance and frequent flyer program. The worst airline in the US was Spirit Airlines (SAVE), however it ranked first in airfare. The poll is interesting in that price alone is not the sole determinant of how consumers evaluate an airline’s performance.

What do analysts say about AAL, and how should binary options traders react?

Over the past 4 financial quarters, American Airlines has consistently outperformed expectations, with actual earnings besting estimated earnings since Q1 2016. The financials of the airline industry tell a different story. In 2014, American Airlines generated revenue of $42.65 billion and earnings of $2.88 billion. Fast-forward to 2015, and revenues dropped to $40.99 billion while earnings came in at $7.61 billion. By 2016, revenues dropped further to $40.18 billion while earnings shrank to $2.68 billion.

The declining trends with revenue and earnings are concerning to investors, but traders can take a short-term approach and profit off the volatility in the stock. In terms of its stock price over the past 52 weeks, American Airlines has shown tremendous range, from a low of $24.85 to a high of $50.64. The next earnings date for the company is scheduled for the 20th – 24th of April 2017. The stock is currently trading at $46.36 per share, and the 1-year target estimate price is $54.27 – another bullish sign.

AAL Stock is Definitely a Value Stock and Traders will want to Profit on the Upside

If we look at the recommendation ratings for AAL, the stock is ranked between a buy and a hold by Thomson Reuters analysts. On 6 February, Bernstein upgraded American Airlines stock from an underperform rating to a market perform rating. If we dig a little deeper, we can see some worrying trends. For example, AAL stock is down 6.7% since it released its last quarterly earnings report. This news is contrary to the performance of the markets which have been rallying to record levels.

The Q4 earnings reports at AAL generated adjusted EPS of $0.92, and revenues that beat the year-on-year figure by 1.7%. However, the company’s total operating costs were up 5.4% year on year at $9 billion. This was largely the result of higher labour costs. During Q4 2016, shareholders received $606 million in share buybacks and dividend payments. For Q1 2017, the year-on-year increase for AAL is expected between 2.5% and 4.5%. Analysts have rated the stock as a subpar growth stock, with a momentum rating of C. It is a high value stock however, making it ideal as part of an investment or trading portfolio.

For binary options traders, the net message is the following: American Airlines stock is undervalued and likely to improve its performance. It is ripe for the picking now, as investors seek to generate value in coming months. Consumers positively perceive it, and it was recently upgraded by analysts.