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Merrill Upgrades AMR Corp. to 'Buy'


Merrill Lynch upgraded AMR Corp. (AMR) to buy from neutral.

Analyst Michael Linenberg says the parent of American Airlines has a turnaround plan that aims to cut costs by $4 billion annually; e.g., in the second quarter he sees about $200 million in labor savings. He notes AMR is very focused on liquidity, and is looking at ways to raise capital, including potential asset sales.

Linenberg says capital expenditure requirements are expected to be modest for the next several years; this could mean positive free-cash flow by 2005. He notes AMR is starting to enjoy unit revenue outperformance.

Linenberg narrowed the $4.00 second-quarter per-share loss estimate to a $2.75 loss. He reduced the $15 2003 loss to a $12.50 loss, and cut the $7.25 2004 loss to a $4.50 loss. He set a 13 12-month target.


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