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American Airlines (AAL) Q4 Earnings Beat, Revenues Miss

Zacks Equity Research

American Airlines Group’s AAL fourth-quarter 2018 earnings (excluding 35 cents from non-recurring items) of $1.04 per share surpassed the Zacks Consensus Estimate of $1.02. Moreover, the bottom line increased on a year-over-year basis.

Revenues of $10,938 million missed the Zacks Consensus Estimate of $11,006.7 million. However, the top line improved on a year-over-year basis. Strong demand for air travel led to this year-over-year improvement in the top line.

Total revenue per available seat miles (TRASM: a key measure of unit revenues) increased 1.7% to 16.02 cents in the reported quarter. Consolidated yield rose 2.4%. Passenger revenue per available seat miles (PRASM) inched up 1.4%.

While traffic (measured by revenue passenger miles) was up 0.4%, capacity (measured by average seat miles) expanded 1.4%. Consolidated load factor (percentage of seats filled by passengers) contracted 70 basis points to 81.4% as traffic growth was outpaced by capacity expansion.

Total operating expenses (on a reported basis) climbed 4.2% year over year to $10,389 million due to the 19.6% surge in consolidated fuel costs. Expenses pertaining to salaries and benefits were down 0.5%. Consolidated operating costs per available seat miles (CASM: excluding fuel and special items) declined 0.2%.

During 2018, this Zacks Rank #2 (Buy) company returned $986 million to shareholders through dividends. Furthermore, the carrier also declared a dividend of 10 cents per share. The dividend will be paid on Feb 20 to the shareholders of record on Feb 6. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Airlines is constantly looking to modernize its fleet. To this end, the carrier ordered 47 new Boeing 787 jets in 2018 in a bid to maintain a young fleet. It is constantly removing outdated planes from its fleet.

American Airlines Group Inc. Price, Consensus and EPS Surprise

 

American Airlines Group Inc. Price, Consensus and EPS Surprise | American Airlines Group Inc. Quote

 

Q1 Outlook

TRASM is expected to either remain flat or increase up to 2% during the first quarter of 2019. Pre-tax margin excluding special items is projected in the range of 2.5-4.5% in the first quarter. Additionally, fuel costs are estimated between $1.97 and $2.02 per gallon in the first quarter. The company predicts first-quarter CASM to increase 4% year over year. Capacity is expected to grow approximately 1% in the first quarter of 2019.

2019 View

Adjusted earnings per share in 2019 are anticipated between $5.50 and $7.5. The Zacks Consensus Estimate for full-year earnings is currently pegged at $5.74 per share.  The upbeat earnings guidance coupled with the bottom line outperformance pleased investors. Consequently, the stock gained in pre-market trading.

CASM (excluding fuel, new labor deals and special items) is expected to be at the upper end of the previously guided 1-2% range. The company’s capex projection for the current year is pegged at $4.7 billion. Capacity is anticipated to expand approximately 3%.

Upcoming Releases

Investors interested in the Zacks Transportation Sector are keenly awaiting fourth-quarter 2018 earnings reports from key players like ArcBest Corporation ARCB, Allegiant Travel Company ALGT and SkyWest, Inc. SKYW. While ArcBest and Allegiant are scheduled to report fourth-quarter earnings on Jan 30, SkyWest will release the same on Jan 31.

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