It has been about a month since the last earnings report for American Airlines (AAL). Shares have added about 5.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American Airlines due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at American Airlines in Q4
American Airlines' fourth-quarter 2018 earnings (excluding 35 cents from non-recurring items) of $1.04 per share surpassed the Zacks Consensus Estimate of $1.02. Moreover, the bottom line increased on a year-over-year basis.
Revenues of $10,938 million missed the Zacks Consensus Estimate of $11,006.7 million. However, the top line improved on a year-over-year basis. Strong demand for air travel led to this year-over-year improvement in the top line.
Total revenue per available seat miles (TRASM: a key measure of unit revenues) increased 1.7% to 16.02 cents in the reported quarter. Consolidated yield rose 2.4%. Passenger revenue per available seat miles (PRASM) inched up 1.4%.
While traffic (measured by revenue passenger miles) was up 0.4%, capacity (measured by average seat miles) expanded 1.4%. Consolidated load factor (percentage of seats filled by passengers) contracted 70 basis points to 81.4% as traffic growth was outpaced by capacity expansion.
Total operating expenses (on a reported basis) climbed 4.2% year over year to $10,389 million due to the 19.6% surge in consolidated fuel costs. Expenses pertaining to salaries and benefits were down 0.5%. Consolidated operating costs per available seat miles (CASM: excluding fuel and special items) declined 0.2%.
During 2018, the company returned $986 million to shareholders through dividends. Furthermore, the carrier also declared a dividend of 10 cents per share. The dividend will be paid on Feb 20 to the shareholders of record on Feb 6.
American Airlines is constantly looking to modernize its fleet. To this end, the carrier ordered 47 new Boeing (NYSE:BA) 787 jets in 2018 in a bid to maintain a young fleet. It is constantly removing outdated planes from its fleet.
Q1 Outlook
TRASM is expected to either remain flat or increase up to 2% during the first quarter of 2019. Pre-tax margin excluding special items is projected in the range of 2.5-4.5% in the first quarter. Additionally, fuel costs are estimated between $1.97 and $2.02 per gallon in the first quarter. The company predicts first-quarter CASM to increase 4% year over year. Capacity is expected to grow approximately 1% in the first quarter of 2019.
2019 View
Adjusted earnings per share in 2019 are anticipated between $5.50 and $7.5. CASM (excluding fuel, new labor deals and special items) is expected to be at the upper end of the previously guided 1-2% range. The company’s capex projection for the current year is pegged at $4.7 billion. Capacity is anticipated to expand approximately 3%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -13.26% due to these changes.
VGM Scores
At this time, American Airlines has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
American Airlines has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
American Airlines Group Inc. (AAL): Free Stock Analysis Report
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