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Strength Seen in American Airlines (AAL): Can Its 5.6% Jump Turn into More Strength?

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American Airlines (AAL - Free Report) shares rallied 5.6% in the last trading session to close at $20.20. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 9.9% loss over the past four weeks.

Shares of the carrier increased despite the bearish outlook (induced by soft bookings and increased cancellations following the Delta variant spread) given by the company. Management expects third-quarter 2021 revenue to decline approximately in the 24-28% band compared with third quarter of 2019 actuals (earlier guidance was of an approximately 20% decline). This was widely expected and hence did not perturb  investors. In fact, they seemed to appreciate the fact that American Airlines clearly stated the likely adverse impact of the Delta variant spread on its third-quarter results.

Price and Consensus

Price Consensus Chart for AAL

This world's largest airline is expected to post quarterly loss of $0.68 per share in its upcoming report, which represents a year-over-year change of +87.7%. Revenues are expected to be $9.43 billion, up 197.3% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For American Airlines, the consensus EPS estimate for the quarter has been revised 11% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on AAL going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>


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