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Will High Costs Hurt American Airlines' (AAL) Q1 Earnings?

Zacks Equity Research

American Airlines Group AAL is scheduled to release first-quarter 2019 financial numbers on Apr 26, before market open. The Zacks Consensus Estimate for first-quarter earnings and revenues is pegged at 52 cents and $10.66 billion, respectively.

In the last reported, the company delivered better-than-expected earnings per share. Also, revenues improved year over year backed by high passenger revenues owing to solid demand for air travel.

Furthermore, American Airlines has an impressive earnings surprise history, having surpassed the consensus mark in each of the trailing four quarters, as the chart below shows.

American Airlines Group Inc. Price and EPS Surprise


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

Investors are keeping their fingers crossed and hoping that American Airlines will deliver a solid performance and surpass earnings estimate in the soon-to-be-reported quarter to be reported as well.

Let’s delve deeper and find out the factors likely to impact American Airlines’ quarterly results.

Despite headwinds like the government shutdown, the grounding of its 737 MAX jets, we expect an improvement in passenger revenues during the first quarter. Additionally, robust traffic during the spring travel period (which started from Mar 1) may lead to an uptick in the load factor (% of seats filled by passengers) during the same period.

Markedly, MAX 8 groundings caused 1,200 flight cancellations in the first quarter (January to March period). The company has 24 such jets in its fleet. For first-quarter passenger revenue per available seat miles, the Zacks Consensus Estimate is pegged at 14.53 cents, higher than the 14.4 cents registered a year ago.

Meanwhile, first-quarter total revenue per available seat mile (TRASM) is anticipated to either remain flat or increase up to 1% year over year. Additionally, pre-tax margin, excluding special items, is estimated to be 2-4% in the quarter to be reported.

With oil prices increasing around 32% in the January-March period, fuel costs are expected to limit bottom-line growth in the soon-to-be-reported quarter. The company expects fuel price to be in the band of $2.02-$2.07 per gallon.

Moreover, cost per available seat mile, excluding fuel and special items, is anticipated to rise in the 2-4% range.

What Does the Zacks Model Say?

Our proven model does not predict an earnings beat for American Airlines in first-quarter 2019. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: American Airlines has an Earnings ESP of -3.51%. The Most Accurate Estimate is pegged at 2 cents below the Zacks Consensus Estimate.

Zacks Rank: American Airlines carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Picks

Investors interested in the Zacks Transportation sector may consider C.H. Robinson Worldwide, Inc. CHRW, Werner Enterprises, Inc. WERN and Triton International Limited TRTN as these stocks possess the perfect mix of elements to beat on earnings in the next releases.

C.H. Robinson has an Earnings ESP of +0.22% and a Zacks Rank #3. The company will release first-quarter earnings numbers on Apr 30.

Werner has an Earnings ESP of +2.06%and a Zacks Rank of 3. The company is set to report first-quarter financial figures on Apr 25.

Triton has an Earnings ESP of +2.51% and is a #3 Ranked player. The company is scheduled to announce first-quarter results on Apr 30.

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