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What Awaits American Airlines (AAL) This Earnings Season?

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American Airlines (AAL - Free Report) is scheduled to report second-quarter 2021 results on Jul 22, before the market opens.

The company’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters (lagging estimates in the remaining one). The average miss is 3.05%. The Zacks Consensus Estimate for second-quarter bottom line has narrowed to a loss of $2.32 per share from a loss of $2.48, 60 days ago.

Against this backdrop, let’s discuss the factors that might have impacted American Airlines’ performance in the June quarter.

Driven by the recent uptick in air-travel demand (particularly for leisure), total passenger revenues at American Airlines are likely to have been high on a sequential basis in the quarter to be reported. The Zacks Consensus Estimate for the to-be-reported quarter’s passenger revenues indicates a 101% surge from the number reported in the March quarter. The Zacks Consensus Estimate for traffic (measured in revenue passenger miles) suggests an improvement from the year ago reported figure.

Owing to higher traffic, load factor (% of seats filled with passengers) is expected to have improved year over year in the June quarter. The Zacks Consensus Estimate for the to-be-reported quarter’s load factor is currently pegged at 75%, suggesting growth from 42.3% reported in the year-ago quarter.

The Zacks Consensus Estimate for second-quarter passenger revenues per available seat miles (PRASM: a key measure of unit revenues) is currently pegged at 11.53 cents, indicating a 78% rise from the figure reported in the second quarter of 2020.

Higher fuel price per gallon is expected to have hurt the bottom line in the March quarter. The Zacks Consensus Estimate for the June quarter’s average fuel price per gallon consumed (mainline+regional) indicates a 70% rise from the year-ago quarter’s reported figure to $1.92.

As more and more flights are taking to the skies to meet the uptick in demand, fuel gallons consumed are likely to have increased in the June quarter. This, in turn, is likely to have dented the bottom line in the to-be-reported quarter. The Zacks Consensus Estimate for the June quarter’s fuel gallons consumed (mainline) indicates a 284% surge from the year-ago quarter’s reported figure.

What Does the Zacks Model Unveil?

The proven Zacks model does not predict a bottom-line outperformance for Delta this time around. The combination of a positive  Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive earnings surprise, which is the not the case here. You can see  the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: American Airlines has an Earnings ESP of +9.77.%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: American Airlines carries a Zacks Rank #4 (Sell), currently.

Highlights of Q1

American Airlines incurred a loss (excluding $2.35 from non-recurring items) of $4.32 per share. The Zacks Consensus Estimate was of a loss of $4.35. Quarterly loss per share was wider than the year-ago loss of $2.65. Operating revenues of $4,008 million slumped 52.9% year over year and also fell short of the Zacks Consensus Estimate of $4,031 million.

Stocks to Consider

Investors interested in the broader  Transportation   sector may consider Southwest Airlines (LUV - Free Report) ,  Herc Holdings  (HRI - Free Report)  and  Alaska Air Group  (ALK - Free Report)  as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

Southwest Airlines  has an Earnings ESP of +56.82% and is Zacks #3 Ranked, presently. The company will release second-quarter 2021 results on Jul 22.

Herc Holdings has an Earnings ESP of +1.85% and a Zacks Rank #2 at present. The company will release second-quarter 2021 results on Jul 22.

Alaska Air  has an Earnings ESP of +39.75% and a Zacks Rank #3, currently. The company will release second-quarter 2021 results on Jul 22.

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