American Airlines Group Inc. (NASDAQ:AAL) just released its latest quarterly results and things are looking bullish. Revenues and losses per share were both better than expected, with revenues of US$1.6b leading estimates by 6.8%. Statutory losses were smaller than the analystsexpected, coming in at US$4.82 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the consensus from American Airlines Group's 15 analysts is for revenues of US$17.3b in 2020, which would reflect a sizeable 48% decline in sales compared to the last year of performance. Per-share losses are expected to explode, reaching US$16.90 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$19.2b and losses of US$17.92 per share in 2020. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for this year.
The consensus price target was broadly unchanged at US$12.66, implying that the business is performing roughly in line with expectations, despite adjustments to both revenue and earnings estimates. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on American Airlines Group, with the most bullish analyst valuing it at US$27.00 and the most bearish at US$1.00 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 48% revenue decline a notable change from historical growth of 1.1% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 24% next year. It's pretty clear that American Airlines Group's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Yet - earnings are more important to the intrinsic value of the business. The consensus price target held steady at US$12.66, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on American Airlines Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple American Airlines Group analysts - going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example - American Airlines Group has 3 warning signs (and 1 which is a bit concerning) we think you should know about.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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