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American Airlines (AAL) Q4 Earnings: What's in the Cards?
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American Airlines Group (AAL - Free Report) is scheduled to report fourth-quarter 2017 results on Jan 25, before the market opens.
Last quarter, the company delivered a positive earnings surprise of 2.2%. However, quarterly earnings declined significantly on a year-over-year basis due to high costs. Revenues of $10,878 million were also below the Zacks Consensus Estimate of $10,882.9 million. Multiple cancellations by the company due to the hurricanes negatively impacted results.
Nonetheless, things seem to be looking up for the company post hurricanes. This is evident from American Airlines’ impressive price performance in the last three months. While the stock has gained 13.9%, the Zacks Airline industry rallied 13.7%.
Given this backdrop, let’s delve deeper to unearth the factors that are likely to influence the company’s fourth-quarter results:
We expect American Airlines’ top line to be driven by higher passenger revenues owing to strong demand for air travel during the holiday season.
The Zacks Consensus Estimate for fourth-quarter 2017 mainline passenger revenues is pegged at $7,101 million, up 5.7% year over year.
Buoyed by the improved scenario, the company issued an improved outlook with respect to consolidated total revenue per available seat miles (TRASM: a key measure of unit revenue) for the to-be-reported quarter. The company now expectsTRASM to rise in the range of 5-6% year over year compared with 2.5-4.5% projected earlier. The improved outlook can be attributed to higher yields across all the geographical regions and better-than-expected domestic close-in bookings.
The Zacks Consensus Estimate for fourth-quarter TRASM (consolidated) is pegged at 15.42 cents, higher than 14.89 cents reported in the third quarter of 2017.
Apart from TRASM, American Airlines expects pre-tax margin between 6.5% and 7% for the quarter. Earlier forecast was in the 4.5-6.5% band.
Also, the key airline players like United Continental Holdings (UAL - Free Report) and JetBlue Airways (JBLU - Free Report) have issued improved projections with respect to unit revenues for the fourth quarter.
Nevertheless, we expect American Airlines’ bottom-line growth to be restricted by increased costs (fuel and labor). Average fuel price per gallon (mainline jet fuel, including taxes) is estimated in the range of $1.88-$1.93 for the final quarter of 2017, higher than the Zacks Consensus Estimate of $1.84.
Consolidated operating cost per available seat mile (CASM), excluding fuel and special items, is forecasted to grow approximately 4% year over year in the to-be-reported quarter. Additionally, it anticipates capacity to increase 1% year over year.
Further, American Airlines expects to record a special non-cash credit of $10 million to income tax expense in the quarter. This is owing to the impact of the recent tax reform on its deferred tax assets and liabilities.
What Does Our Model Say?
Our proven model does not show conclusively that American Airlines will beat earnings in fourth-quarter 2017. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. However, that is not the case as highlighted below.
Zacks ESP: American Airlines has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 92 cents per share. 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 #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction inconclusive. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for fourth-quarter earnings is projected to be flat on a year-over-year basis, mainly due to higher fuel costs. However, the same for sales is projected at $10.58 billion, up 8.1% year over year. The uptick is primarily owing the anticipated growth in passenger revenues.
American Airlines Group, Inc. Price and EPS Surprise
Investors interested in the Zacks Airline industry may also consider SkyWest (SKYW - Free Report) as our model shows it possesses the right combination of elements to post an earnings beat in its next release.
SkyWest has an Earnings ESP of +7.80% and a Zacks Rank #1. The company will release fourth-quarter 2017 results on Feb 1.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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American Airlines (AAL) Q4 Earnings: What's in the Cards?
American Airlines Group (AAL - Free Report) is scheduled to report fourth-quarter 2017 results on Jan 25, before the market opens.
Last quarter, the company delivered a positive earnings surprise of 2.2%. However, quarterly earnings declined significantly on a year-over-year basis due to high costs. Revenues of $10,878 million were also below the Zacks Consensus Estimate of $10,882.9 million. Multiple cancellations by the company due to the hurricanes negatively impacted results.
Nonetheless, things seem to be looking up for the company post hurricanes. This is evident from American Airlines’ impressive price performance in the last three months. While the stock has gained 13.9%, the Zacks Airline industry rallied 13.7%.
Given this backdrop, let’s delve deeper to unearth the factors that are likely to influence the company’s fourth-quarter results:
We expect American Airlines’ top line to be driven by higher passenger revenues owing to strong demand for air travel during the holiday season.
The Zacks Consensus Estimate for fourth-quarter 2017 mainline passenger revenues is pegged at $7,101 million, up 5.7% year over year.
Buoyed by the improved scenario, the company issued an improved outlook with respect to consolidated total revenue per available seat miles (TRASM: a key measure of unit revenue) for the to-be-reported quarter. The company now expectsTRASM to rise in the range of 5-6% year over year compared with 2.5-4.5% projected earlier. The improved outlook can be attributed to higher yields across all the geographical regions and better-than-expected domestic close-in bookings.
The Zacks Consensus Estimate for fourth-quarter TRASM (consolidated) is pegged at 15.42 cents, higher than 14.89 cents reported in the third quarter of 2017.
Apart from TRASM, American Airlines expects pre-tax margin between 6.5% and 7% for the quarter. Earlier forecast was in the 4.5-6.5% band.
Also, the key airline players like United Continental Holdings (UAL - Free Report) and JetBlue Airways (JBLU - Free Report) have issued improved projections with respect to unit revenues for the fourth quarter.
Nevertheless, we expect American Airlines’ bottom-line growth to be restricted by increased costs (fuel and labor). Average fuel price per gallon (mainline jet fuel, including taxes) is estimated in the range of $1.88-$1.93 for the final quarter of 2017, higher than the Zacks Consensus Estimate of $1.84.
Consolidated operating cost per available seat mile (CASM), excluding fuel and special items, is forecasted to grow approximately 4% year over year in the to-be-reported quarter. Additionally, it anticipates capacity to increase 1% year over year.
Further, American Airlines expects to record a special non-cash credit of $10 million to income tax expense in the quarter. This is owing to the impact of the recent tax reform on its deferred tax assets and liabilities.
What Does Our Model Say?
Our proven model does not show conclusively that American Airlines will beat earnings in fourth-quarter 2017. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. However, that is not the case as highlighted below.
Zacks ESP: American Airlines has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 92 cents per share. 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 #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction inconclusive. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for fourth-quarter earnings is projected to be flat on a year-over-year basis, mainly due to higher fuel costs. However, the same for sales is projected at $10.58 billion, up 8.1% year over year. The uptick is primarily owing the anticipated growth in passenger revenues.
American Airlines Group, Inc. Price and EPS Surprise
American Airlines Group, Inc. Price and EPS Surprise | American Airlines Group, Inc. Quote
Another Stock That Warrants a Look
Investors interested in the Zacks Airline industry may also consider SkyWest (SKYW - Free Report) as our model shows it possesses the right combination of elements to post an earnings beat in its next release.
SkyWest has an Earnings ESP of +7.80% and a Zacks Rank #1. The company will release fourth-quarter 2017 results on Feb 1.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>