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American Airlines (AAL) Declines Despite Q1 Earnings Beat

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American Airlines Group (AAL - Free Report) reported first-quarter 2018 earnings per share (excluding 36 cents from non-recurring items) of 75 cents, edging past the Zacks Consensus Estimate of 74 cents. Earnings increased approximately 23% on a year-over-year basis.

How Was the Estimate Revision Trend?

Investors should note that the earnings estimate revisions for American Airlinesdepicted a rosy picture prior to the earnings release. The stock had seen the Zacks Consensus Estimate for fourth-quarter earnings being revised 29.8% upward over the last 30 days

Moreover, the carrier has an impressive earnings surprise history. Even before posting the earnings beat in the first-quarter, the company delivered positive surprises in each of the past four quarters. The average earnings beat was 3.8%.

Revenues Lower Than Expected

American Airlines recorded revenues of $10,401 million, which fell short of the Zacks Consensus Estimate of $10, 411.9 million. However, it compared favorably with the year-ago number of $9,624 million.

Key Statistics: Operating cost per available seat mile excluding fuel and special items increased 2.8% on a year over year basis. Total revenue per available seat miles (TRASM) improved 3.5% in the reported quarter. Yield improved 1.5%.

During the quarter, the company returned $498 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 May 22, to the shareholders on May 8. We are impressed by the company’s efforts to reward shareholders through stock repurchases and dividend payments.

TRASM is expected to increase in the band of 1.5% to 3.5% in the second quarter of 2018. Pre-tax margin excluding special items is projected in the range of 7.5% to 9.5%.

Adjusted earnings per share in 2018 are now expected between $5.00 and $6.00 (previous guidance had hinted at earnings between $5.50 and $6.50). The Zacks Consensus Estimate for 2018 earnings is currently pegged at $5.74 per share. Higher fuel costs led to the view being trimmed. Consolidated jet fuel per gallon is projected in the band of $2.18 to $2.23 for the second quarter.

Zacks Rank: Currently, American Airlines carries a Zacks Rank #3 (Hold) which is subject to change following the earnings announcement. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Check back later for our full write up on this American Airlines earnings report later!

Stock Movement: The revenue miss and the lackluster 2018 earnings guidance disappointed investors. Consequently, shares of the company were down in pre-market trading at the time of writing.

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