American Airlines Group Inc AAL shares are trading lower by 1.91% to $12.84 during Monday’s session. Traders and investors are watching for the company’s third-quarter earnings report which is confirmed for Thursday’s pre-market session. According to analyst consensus estimates, AAL is expected to report EPS of 15 cents on revenue of $13.471 billion.
What To Know: The third-quarter results will follow a disappointing second-quarter performance, where the airline reported total operating revenue growth of just 2% year-over-year to $14.33 billion, missing the consensus target of $14.36 billion.
The airline's profit margins also took a hit in the second-quarter, with its adjusted operating margin shrinking to 9.7%, down significantly from 15.4% in the same period last year. American Airlines cited increased operating expenses, which rose 8.9% to $12.95 billion, as a major contributor to this margin decline.
Despite these challenges, the company exceeded earnings expectations for the second quarter, reporting an adjusted EPS of $1.09, slightly above the consensus estimate of $1.05.
What Else: American Airlines Q2 Earnings: Mixed Performance Amid Cost Pressures, Lowers Annual Profit Outlook
However, this was still a significant drop from the $1.92 EPS recorded a year earlier, highlighting the pressures on the company's bottom line. American also lowered its full-year EPS guidance, forecasting a range of $0.70 to $1.30, down from its prior outlook of $2.25 to $3.25.
What Else: As American Airlines heads into its third-quarter report, investors are likely to focus on several key factors that have been shaping the company's financial performance.
One critical area is operating margins, with the airline guiding for an adjusted operating margin of just 2% to 4% in the third-quarter, a far cry from the 9.7% achieved in the previous quarter. The company's guidance for breakeven adjusted EPS in the third quarter further reflects the financial headwinds it faces.
In terms of operational metrics, American Airlines has been able to maintain growth in passenger demand. Revenue passenger miles increased by 8.5% in the second-quarter, while available seat miles (ASM) grew by 8%, indicating robust capacity growth.
The passenger load factor remained stable at 86.6%, only slightly higher than the 86.2% recorded a year ago. However, total revenue per available seat mile (TRASM) declined by 5.6%, and the company expects a further drop of 2.5% to 4.5% in Q3, reflecting weaker pricing power and demand softness.
Rising fuel costs also remain a concern. The average aircraft fuel price rose 3.3% year-over-year in Q2 to $2.70 per gallon, putting additional pressure on profitability. Moreover, operating costs per ASM rose by 0.8%, and American expects this metric, excluding fuel and special items, to increase by another 1% to 3% in the third quarter.
On a positive note, American Airlines has been making strides in reducing its debt load, a key focus for the company as it works toward its long-term financial health. In the second-quarter, the airline reduced its total debt by nearly $680 million, bringing it closer to its goal of cutting $15 billion in debt by the end of 2025.
As of the end of the second quarter, American had $11.7 billion in total liquidity, providing some cushion as it navigates a challenging operating environment.
Is AAL A Good Stock To Buy?
An investor can make a few decisions when deciding whether a stock is a good buy. In addition to valuation metrics and price action which you can find on Benzinga's quote pages – like American Airlines Gr‘s page for example – there are factors like whether or not a company pays a dividend or buys a large portion of its stock each quarter.
These are known as capital allocation programs. American Airlines does pay a dividend, which yields 1.22% per year as of the closing price on Oct. 21, 2024. Feel free to search Benzinga's dividend calendar for the next company that is due to pay a dividend and determine what kind of yield you can earn for holding a share of the company.
Buyback programs are obviously different and highly variable. A company can approve a buyback program and purchase shares as it sees fit over the course of time in which the buyback was authorized. Looking through the latest news on American Airlines Gr will often yield whether or not the company has approved a buyback program recently. Buyback programs usually serve as a support for share prices, serving as a backstop for demand.
According to data from Benzinga Pro, AAL has a 52-week high of $16.15 and a 52-week low of $9.07.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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