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American Airlines (AAL) Shares Pop on Improved Q2 Guidance

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American Airlines Group AAL provided a bullish investor update for the second quarter of 2021, following which shares of the company rose 1.5% in after-market trading on Jul 13.

The company anticipates total revenues to decline approximately 37.5% in the second quarter from the comparable period in 2019. This is better than its previous guidance of a decrease of around 40%. It estimates available seat miles (ASMs) to fall about 24.6% from the 2019 level compared with a decline of 20-25% expected previously.

Cost per available seat mile (CASM), excluding fuel and net special items, is predicted to rise 11-12% compared with the 2019 level. This indicates an improvement from the previous guidance of an increase between 13% and 17%, thanks to the company’s cost-control measures.

American Airlines Group Inc. Price
American Airlines Group Inc. Price

American Airlines Group Inc. Price
American Airlines Group Inc. price | American Airlines Group Inc. Quote

American Airlines anticipates average fuel price per gallon to have been $1.91 for the second quarter, higher than the previous guidance of $1.84-$1.89. Pre-tax margin, excluding net special items, is forecast between -19% and -20% (previous view: between -27% and -30%). The company attributed this betterment in guidance to improvement in revenues and effectiveness of cost-control measures implemented.

American Airlines stated that it expects to report between a net loss of $35 million and a net profit of $25 million in the second quarter. This includes approximately $1.4 billion of net special credits related to the coronavirus aid provided by the United States Treasury. Excluding this, the airline expects to report a net loss of $1.1 billion-$1.2 billion. Net loss per share, excluding net special credits, is estimated in the range of $1.67-$1.76 for the second quarter. The Zacks Consensus Estimate for the same stands at $2.32.

As air-travel demand continues to improve on increased vaccinations and reopening of international travel, American Airlines expects positive cash flow for the second quarter. After burning millions of dollars in cash since the beginning of the pandemic, this is the first time that cash flow is expected to turn positive. The airline estimates its second-quarter average daily cash build rate to be approximately $1 million per day. Thanks to continued improvement in revenues and forward bookings, the carrier expects to end the second quarter with approximately $21.3 billion in total available liquidity, which is around $1.3 billion higher than its previous guidance.

American Airlines’ second-quarter 2021 results are set to be released on Jul 22.

Zacks Rank & Key Picks

American Airlines carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Landstar System LSTR, Expeditors International of Washington EXPD and ArcBest Corporation ARCB. While ArcBest sports a Zacks Rank #1 (Strong Buy), Landstar and Expeditors carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Landstar, Expeditors and ArcBest have rallied more than 35%, 59% and 100% in a year’s time, respectively.

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American Airlines Group Inc. (AAL) : Free Stock Analysis Report

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Landstar System, Inc. (LSTR) : Free Stock Analysis Report

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