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Why Is American Airlines (AAL) Down 3% Since Last Earnings Report?
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It has been about a month since the last earnings report for American Airlines (AAL - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is American Airlines due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Second Quarter Earnings
American Airlines' second-quarter 2018 earnings (excluding 41 cents from non-recurring items) of $1.63 per share surpassed the Zacks Consensus Estimate by 4 cents. Quarterly earnings decreased on a year-over-year basis mainly due to high fuel costs.
Revenues of $11,643 million fell short of the Zacks Consensus Estimate of $11,652 million. The top line, however, improved on a year-over-year basis. Strong demand for air travel led to the year over year improvement in the top line.
Total revenue per available seat miles (TRASM: a key measure of unit revenue) improved 2.1% to 15.97 cents in the reported quarter. Consolidated yield improved 1%. Passenger revenue per available seat miles (PRASM) improved 1.5%.
While traffic (measured by revenue passenger miles) was up 2%, capacity (measured by average seat miles) was up 1.6%. Consolidated load factor (percentage of seats filled by passengers) increased to 83.4% from 83% a year-ago as traffic growth outpaced capacity expansion in the second quarter of 2018.
Total operating expenses (on a reported basis) climbed 10.3% year over year to approximately $10,615 million primarily due to the rise in fuel costs. Expenses pertaining to salaries and benefits were up 1.8%. Consolidated operating costs per available seat miles (CASM: excluding fuel and special items) increased 2.4%.
During the quarter under review, the company returned $396 million to shareholders through dividends and buybacks. Furthermore, the carrier also declared a dividend of 10 cents per share. The dividend will be paid on Aug 21, to the shareholders on Aug 7.
Outlook
TRASM is expected to increase in the band of 1% to 3% in the third quarter of 2018. Pre-tax margin excluding special items is projected in the range of 5% to 7% in the third quarter. Consolidated jet fuel per gallon (including taxes) is projected in the band of $2.22 to $2.27 for the third quarter.
Adjusted earnings per share in 2018 are now expected between $4.50 and $5.00 (previous guidance had hinted at earnings between $5 and $6). Higher fuel costs led to the view being trimmed.
Consolidated CASM (excluding special items and fuel) is expected to increase 1% in the third quarter of 2018. The metric is also anticipated to increase approximately 1.5% in 2018. The metric is still expected to increase in the band of 1% to 2% in each of 2019 and 2020.
Capacity (system) in the third quarter is projected to increase 3.3% year over year. The metric is expected to increase 1.6% in the final quarter of 2018. Capacity in 2018 is expected to grow 2.2%, compared with 2.5% expected earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -17.79% due to these changes.
VGM Scores
Currently, American Airlines has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our style scores.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise American Airlines has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is American Airlines (AAL) Down 3% Since Last Earnings Report?
It has been about a month since the last earnings report for American Airlines (AAL - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is American Airlines due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Second Quarter Earnings
American Airlines' second-quarter 2018 earnings (excluding 41 cents from non-recurring items) of $1.63 per share surpassed the Zacks Consensus Estimate by 4 cents. Quarterly earnings decreased on a year-over-year basis mainly due to high fuel costs.
Revenues of $11,643 million fell short of the Zacks Consensus Estimate of $11,652 million. The top line, however, improved on a year-over-year basis. Strong demand for air travel led to the year over year improvement in the top line.
Total revenue per available seat miles (TRASM: a key measure of unit revenue) improved 2.1% to 15.97 cents in the reported quarter. Consolidated yield improved 1%. Passenger revenue per available seat miles (PRASM) improved 1.5%.
While traffic (measured by revenue passenger miles) was up 2%, capacity (measured by average seat miles) was up 1.6%. Consolidated load factor (percentage of seats filled by passengers) increased to 83.4% from 83% a year-ago as traffic growth outpaced capacity expansion in the second quarter of 2018.
Total operating expenses (on a reported basis) climbed 10.3% year over year to approximately $10,615 million primarily due to the rise in fuel costs. Expenses pertaining to salaries and benefits were up 1.8%. Consolidated operating costs per available seat miles (CASM: excluding fuel and special items) increased 2.4%.
During the quarter under review, the company returned $396 million to shareholders through dividends and buybacks. Furthermore, the carrier also declared a dividend of 10 cents per share. The dividend will be paid on Aug 21, to the shareholders on Aug 7.
Outlook
TRASM is expected to increase in the band of 1% to 3% in the third quarter of 2018. Pre-tax margin excluding special items is projected in the range of 5% to 7% in the third quarter. Consolidated jet fuel per gallon (including taxes) is projected in the band of $2.22 to $2.27 for the third quarter.
Adjusted earnings per share in 2018 are now expected between $4.50 and $5.00 (previous guidance had hinted at earnings between $5 and $6). Higher fuel costs led to the view being trimmed.
Consolidated CASM (excluding special items and fuel) is expected to increase 1% in the third quarter of 2018. The metric is also anticipated to increase approximately 1.5% in 2018. The metric is still expected to increase in the band of 1% to 2% in each of 2019 and 2020.
Capacity (system) in the third quarter is projected to increase 3.3% year over year. The metric is expected to increase 1.6% in the final quarter of 2018. Capacity in 2018 is expected to grow 2.2%, compared with 2.5% expected earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -17.79% due to these changes.
VGM Scores
Currently, American Airlines has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our style scores.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise American Airlines has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.