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A month has gone by since the last earnings report for American Airlines (AAL). Shares have added about 18 % in the past month, easily outpacing the S&P 500 in that time frame.
Will the recent positive trend continue leading up to their next earnings release, or is the stock due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Third Quarter Earnings
American Airlines reported better-than-expected earnings in the third quarter of 2016. The company posted adjusted earnings per share of $2.80 that comfortably beat the Zacks Consensus Estimate of $1.68. Quarterly earnings increased more than 1% year over year.
Revenues of $10,594 million were 1.1% below the year-ago figure but edged past the Zacks Consensus Estimate of $10,549 million. Consolidated passenger revenue per available seat mile declined 3.3% to 12.72 cents in the reported quarter. Consolidated yield dipped 0.6% to 15.27 cents. Total revenue per available seat mile declined 2.2% to 14.73 cents.
Traffic was down 1.6%, whereas capacity was up 1.2%. This resulted in relatively empty planes. Consolidated load factor declined as traffic contracted while capacity expanded. Load factor deteriorated to 83.3% from the comparable year-ago figure of 85.6%.
Total operating expenses rose 5.2% to $9.2 billion, mainly because of the 15.3% increase in salaries and benefits expenses. The recent labor deals inked by the company and an $86 million accrual pertaining to the carrier’s profit sharing program contributed to the increase in expenses.
Fuel price per gallon (mainline) for the fourth quarter is projected in the band of $1.59 to $1.64. Fuel price per gallon (regional) for the fourth quarter is projected in the band of $1.65 to $1.70. The carrier expects consolidated fuel costs to witness a year-over-year decline of approximately $1.2 billion in 2016.
How have estimates been moving since then?
It turns out, fresh estimates have trended downward during the past month. There have been two revisions higher for the current quarter compared to three lower in the month since the earnings report came out. The consensus estimate has shifted by -5.6 % due to these changes, and the move lower is evident in this chart below, even though shares of AAL have gone in the right direction:
At this time, American Airlines’ stock has a nice Growth score of ‘B’, though it is lagging on the momentum front with a ‘D’. However, the stock was allocated a grade of ‘A’ on the value side, putting it in the first quintile for this investment strategy. Overall, the stock looks pretty impressive from a fundamental look, as the company has a VGM score of ‘A’, putting it into the 20% of all the companies we research.
Overall estimate activity has been mixed for AAL stock. Yes, short term figures aren’t great, but if you look a little further out the expectations are more impressive. Due to this back and forth nature, we have shares of AAL at a Zacks Rank # 3 (hold), meaning we are expecting an in-line return from AALin the next few months. However, investors focused on value will likely appreciate the story in American Airlines stock more than most.
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AMER AIRLINES (AAL): Free Stock Analysis Report
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