AMR shares drop after warning leads to analysts' cuts: At one point in trading, stock fell to a 52-week low

Sep. 25--Shares of AMR Corp. lost one-seventh of their value Monday after the parent of American Airlines Inc. warned that its revenue and costs were not as good as many investment analysts had expected.

AMR shares briefly hit a 52-week low of $20.28 in New York Stock Exchange trading before closing at $20.77, off $3.49 or 14.4 percent for the day.

Several analysts cut their earnings estimates or price targets for AMR shares, citing the company's Friday investment update that said its revenue would be lower and costs would be higher than many on Wall Street had expected.

J.P. Morgan airline analyst Jamie Baker, who had raised his earnings estimates for AMR earlier in the third quarter, prefaced his comments Monday with the note: "We Should Have Left Well Enough Alone."

Mr. Baker, who had been projecting a $1.01-a-share profit for AMR for the quarter, cut that to 66 cents. For the fourth quarter, Mr. Baker predicted a 50-cent loss, compared with his previous estimate of a 12-cent gain.

Other analysts, including those from Lehman Brothers, Goldman Sachs, UBS and Soleil Securities, cut their earnings estimates for AMR.

As of Monday afternoon, Thomson Financial had a consensus analysts' estimate of 88 cents a share profit for AMR's third quarter, compared with 98 cents a week earlier. For full year 2007, the consensus had dropped to $2.55, from $2.78 a week earlier.

AMR projected Friday that American's unit revenue would be up 4 percent to 5 percent in the third quarter, which ends Sunday. Including American Eagle, unit revenue should climb 3.7 to 4.7 percent.

That trails some of AMR's competitors.

UAL Corp., parent of United Airlines Inc., had predicted a 7.5 percent to 8.5 percent increase in unit revenue, and Continental Airlines Inc. had estimated its August unit revenue was up 6.5 percent to 7.5 percent, on top of a 4.1 percent increase in July.

AMR also estimated its unit costs in 2007 would be about 11.27 cents per available seat mile, up from the 11.14-cent estimate it gave in late June.

It said higher costs excluding fuel and some special items were "mostly attributable to investments to improve customer experience, accelerated depreciation to reflect cabin refurbishment programs, reduced capacity associated with weather related cancellations (primarily in July) and higher revenue related expense."

An AMR spokesman said the company had no comment on the revised estimates or the stock drop Monday.

Other airlines were caught in AMR's downdraft, with UAL Corp. off 6.0 percent, Continental Airlines Inc. lower by 6.9 percent, Northwest Airlines Inc. down 5.2 percent, Delta Air Lines Inc. off 8.7 percent and US Airways Group Inc. down 11.6 percent. Southwest Airlines by comparison was off a relatively minor 2.3 percent.

To see more of The Dallas Morning News, or to subscribe to the newspaper, go to Copyright (c) 2007, The Dallas Morning News Distributed by McClatchy-Tribune Information Services. For reprints, email, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.