American Airlines Set To Report Q3 Earnings: What's Going On?

American Airlines Group Inc AAL shares are trading flat at $12.97 during Wednesday’s session as traders and investors look ahead to the company's third-quarter earnings report, scheduled for Thursday before the market opens. Analysts are expecting the airline to report EPS of 15 cents on revenue of $13.47 billion.

What To Know: In the second quarter, American Airlines faced a challenging performance, reporting only 2% year-over-year revenue growth to $14.33 billion, missing the consensus estimate of $14.36 billion.

The company also saw its adjusted operating margin shrink to 9.7%, a significant drop from 15.4% the year before, largely due to rising operating expenses, which increased by 8.9% to $12.95 billion.

Despite this, American slightly exceeded EPS expectations, reporting $1.09 compared to the $1.05 forecast.

Heading into the third-quarter results, key areas of focus for investors include the company's profitability outlook, as American has guided for a sharp drop in adjusted operating margins to a range of 2% to 4%, down from 9.7% in the second quarter.

The airline has also forecasted breakeven adjusted EPS for the third quarter, indicating continued financial headwinds.

Read Also: Boeing Q3 Earnings: Revenue And Profit Decline, Cultural Challenges, CEO Ortberg Vows Transformation

What Else: Operationally, American Airlines has maintained robust passenger demand, with revenue passenger miles increasing by 8.5% in the second-quarter, while available seat miles grew 8%.

The passenger load factor remained steady at 86.6%, just slightly up from 86.2% a year ago. However, the company experienced a decline in total revenue per available seat mile (TRASM) by 5.6%, and it has projected another drop of 2.5% to 4.5% in Q3, reflecting softer pricing and demand pressures.

Fuel costs remain a significant challenge for the airline, with the average fuel price rising 3.3% year-over-year in the second quarter to $2.70 per gallon. Operating costs per available seat mile also increased by 0.8%, with American expecting further increases of 1% to 3%, excluding fuel and special items, in the third quarter.

On a more positive note, American Airlines continues to make progress in reducing its debt, having cut nearly $680 million from its total debt in the second quarter as part of its broader goal to reduce $15 billion in debt by the end of 2025.

As of the end of the second quarter, the company had $11.7 billion in total liquidity, providing a cushion as it navigates ongoing industry challenges.

With third quarter earnings just around the corner, investors will be closely monitoring how American addresses ongoing cost pressures, fuel price increases, and any potential shifts in passenger demand as the airline works to improve its financial position amidst a turbulent market.

Read Also: American Airlines Group Earnings Preview

How To Buy AAL Stock

By now you're likely curious about how to participate in the market for American Airlines – be it to purchase shares, or even attempt to bet against the company.

Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy ‘fractional shares,' which allows you to own portions of stock without buying an entire share. For example, some stock, like Berkshire Hathaway, or Amazon.com, can cost thousands of dollars to own just one share. However, if you only want to invest a fraction of that, brokerages will allow you to do so.

In the the case of American Airlines, which is trading at $12.96 as of publishing time, $100 would buy you 7.72 shares of stock.

If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform, or a broker who will allow you to ‘go short' a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option, or sell a call option at a strike price above where shares are currently trading – either way it allows you to profit off of the share price decline.

According to data from Benzinga Pro, AAL has a 52-week high of $16.15 and a 52-week low of $9.07.