Air Canada (AC) AI Stock Analysis

• Market Cap: $4.42B
• Dividend Yield: N/A
• Average Volume (3M): 3.79M
• Price to Earnings (P/E): 2.7
• Beta (1Y): 1.02
• Revenue Growth: 1.93%
• EPS Growth: -24.67%
• Country: CA
• Employees: 37,100
• Sector: Industrials
• Sector Strength: 61
• Industry: Airlines, Airports & Air Services
• EPS (TTM): 4.79
• Shares Outstanding: 102,314,030
• 10 Day Avg. Volume: 4,260,538
• 30 Day Avg. Volume: 3,793,726
• PEG Ratio: 0.20
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.25
• Price to Cash Flow (P/CF): 2.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: C$22.45
• Price Target Upside: 58.73% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 10

Air Canada's overall stock score reflects a balance of strong revenue performance and operational improvements against the backdrop of financial challenges such as high leverage and declining profit margins. The stock appears undervalued, but technical indicators suggest caution.

Positive Factors

Financial Performance

Air Canada is on track to retire 14% of its fully diluted shares, indicating a strong financial position and ability to distribute excess cash to shareholders.

Market Position

Air Canada is expected to shift focus from network restoration to network optimization over the coming years.

Revenue Performance

Air Canada reported better than expected Q4/24 results, driven by stronger than expected passenger revenue per available seat mile, highlighting a healthy demand environment.

Negative Factors

Bookings Decline

Bookings for transborder flights are tracking down 10% across the industry for the 2025 peak season.

Tariff Concerns

The risk to Air Canada's 2025 outlook has increased due to a potentially escalating trade war with the US.

Trade Uncertainty

Transborder demand reaction in certain leisure destinations is negatively impacted due to US-Canada trade uncertainty.

Air Canada Business Overview & Revenue Model

Company Description

Air Canada provides domestic, U.S. transborder, and international airline services. It offers scheduled passenger services under the Air Canada Vacations and Air Canada Rouge brand name in the Canadian market, the Canada-U.S. transborder market, and in the international market to and from Canada, as well as through capacity purchase agreements on other regional carriers. As of December 31, 2021, the company operated a fleet of 175 aircraft under the Air Canada mainline brand name comprising 97 Boeing and Airbus narrow-body aircraft, and 78 Boeing and Airbus wide-body aircraft; 123 aircraft under the Air Canada Express brand name, including 50 Mitsubishi regional jets, 48 De Havilland Dash-8 turboprop aircraft and 25 Embraer 175 aircraft; and 39 aircraft under the Air Canada Rouge brand name consisting of 14 Airbus A321 aircraft, 5 Airbus A320 aircraft, and 20 Airbus A319 aircraft. It also provides air cargo services in domestic and U.S. transborder routes, as well as on international routes between Canada and markets in Europe, Asia, South America, and Australia. In addition, the company operates, develops, markets, and distributes vacation travel packages in the Caribbean, Mexico, the United States, Europe, Central and South America, South Pacific, Australia, and Asia; offers cruise packages in North America, Europe, and the Caribbean; and provides travel loyalty programs. Air Canada was founded in 1937 and is headquartered in Saint-Laurent, Canada.

How the Company Makes Money

Air Canada generates revenue primarily through passenger air transportation services, which account for the majority of its income. This includes ticket sales for both domestic and international flights. Additionally, the company earns money from cargo services, transporting goods across its extensive flight network. Ancillary services, such as seat upgrades, in-flight purchases, and baggage fees, also contribute to its revenue streams. Air Canada's loyalty program, Aeroplan, provides further income through partnerships with other airlines and retail partners, allowing members to earn and redeem points. The company benefits from strategic partnerships and code-sharing agreements with other airlines within the Star Alliance, enhancing its network reach and customer base.

Air Canada Financial Statement Overview

Summary

Air Canada's financial performance shows a mix of strengths and weaknesses. While revenue growth and an improved equity position are positive, declining profit margins and high leverage pose significant risks. The reduction in free cash flow also highlights potential challenges in sustaining growth.

Income Statement

The company's income statement shows a mixed performance. The gross profit margin for 2024 is 24.5%, indicating efficient cost management. However, the net profit margin has decreased from 10.42% in 2023 to 7.73% in 2024, showing a decline in profitability. Revenue growth from 2023 to 2024 was modest at 1.93%. EBIT and EBITDA margins have also decreased, pointing to increased operational expenses or reduced efficiency.

Balance Sheet

The balance sheet reveals potential risks with a high debt-to-equity ratio of 5.31 in 2024, suggesting significant leverage and potential financial risk. However, the equity ratio improved from 2.63% in 2023 to 7.65% in 2024, indicating better equity standing. Return on equity is high at 72.00%, but this is influenced by low equity levels.

Cash Flow

Cash flow statements indicate challenges with free cash flow declining significantly from 2023 to 2024, with a growth rate of -53.04%. The operating cash flow to net income ratio is 2.29, suggesting strong cash generation relative to net income. However, the decrease in free cash flow to net income ratio from 1.21 in 2023 to 0.75 in 2024 reflects reduced cash available for expansion or debt repayment.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
22.25B	21.83B	16.56B	6.40B	5.83B
	Gross Profit
5.46B	6.15B	2.80B	-1.62B	-2.31B
	EBIT
1.26B	2.28B	-187.00M	-3.05B	-3.78B
	EBITDA
3.04B	4.83B	1.00B	-1.65B	-2.39B
	Net Income Common Stockholders
1.72B	2.28B	-1.70B	-3.60B	-4.65B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
6.98B	8.55B	7.99B	8.80B	7.50B
	Total Assets
31.21B	30.20B	29.51B	30.61B	28.91B
	Total Debt
12.67B	13.86B	16.31B	16.52B	12.99B
	Net Debt
10.15B	11.04B	13.61B	12.28B	9.33B
	Total Liabilities
28.82B	29.40B	31.06B	30.61B	27.20B
	Stockholders Equity
2.39B	796.00M	-1.55B	9.00M	1.72B
Cash Flow		Free Cash Flow
1.29B	2.76B	796.00M	-2.64B	-3.56B
	Operating Cash Flow
3.93B	4.32B	2.37B	-1.56B	-2.35B
	Investing Cash Flow
-1.36B	-1.83B	-2.50B	-1.87B	-733.00M
	Financing Cash Flow
-2.87B	-2.37B	-1.61B	4.01B	4.70B

Air Canada Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 14.14
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:AC, the sentiment is Negative. The current price of 14.14 is below the 20-day moving average (MA) of 14.59, below the 50-day MA of 16.29, and below the 200-day MA of 18.40, indicating a bearish trend. The MACD of -0.79 indicates Positive momentum. The RSI at 22.54 is Positive, neither overbought nor oversold. The STOCH value of 11.19 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:AC.

Air Canada Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FTG	73 Outperform	C$181.25M	15.89	17.82%	―	18.03%	-6.83%
AC	68 Neutral	$4.42B	2.68	112.28%	―	1.93%	-24.67%
Sector *	62 Neutral	$7.67B	13.25	3.04%	3.47%	3.63%	-13.99%
ONEX	56 Neutral	C$6.69B	17.39	3.54%	0.45%	-17.78%	-41.13%
CHR	46 Neutral	C$513.73M	―	-1.28%	―	-12.40%	-529.26%
TRZ	45 Neutral	C$62.27M	―	12.83%	―	5.10%	-484.90%