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Can American Airlines (AAL) Retain Beat Streak in Q1 Earnings?

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American Airlines Group (AAL - Free Report) is scheduled to report first-quarter 2022 results on Apr 21, before market open.

The Zacks Consensus Estimate for the company’s first-quarter loss has widened by 2.1% in the past 60 days. However, AAL has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 4.4%.

Let’s see how things are shaping up for American Airlines this earnings season.

Factors to Note

With air-travel demand steadily rebounding, AAL’s passenger revenues are expected to reflect significant year-over-year increase. The anticipated increase in passenger revenues is likely to have driven the company’s top line in the first quarter.

However, since air-travel demand continues to be below the pre-pandemic levels, American Airlines expects total revenues to decline approximately 16% in first-quarter 2022 from the comparable period in 2019.

Escalating fuel costs amid the Russia-Ukraine war are likely to have hurt the company’s bottom line in the soon-to-be-reported quarter. For the first quarter, AAL estimates fuel cost per gallon to be $2.80-$2.85 compared with $2.36 reported in the fourth quarter of 2021. The Zacks Consensus Estimate for the same stands at $2.80.

Amid high fuel costs, American Airlines has reduced its capacity for the first quarter. The airline expects capacity, measured by available seat miles, to decline 10.7% in the first quarter from the 2019 level. Reduced capacity, along with high labor costs (due to increased hiring efforts), is pushing up non-fuel unit costs or cost per available seat mile (CASM), excluding fuel and net special items. AAL predicts cost per available seat mile (CASM), excluding fuel and net special items, to increase 12-13% in the first quarter from the 2019 level. Increased non-fuel unit costs are expected to get reflected in the airline’s bottom-line number.

Earnings Whispers

The proven Zacks model predicts an earnings beat for American Airlines this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: American Airlines has an Earnings ESP of +1.54% as the Most Accurate Estimate is pegged at a loss of $2.44, while the Zacks Consensus Estimate is poised at a loss of $2.48. 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.

Highlights of Q4 Earnings

American Airlines' fourth-quarter 2021 loss (excluding 2 cents from non-recurring items) of $1.42 cents per share compared favorably with the Zacks Consensus Estimate of a loss of $1.51. Quarterly loss per share was also narrower than the year-ago loss of $3.86. Thanks to improving air-travel demand, operating revenues of $9,427 million skyrocketed 134.1% year over year and also surpassed the Zacks Consensus Estimate of $9,320.1 million.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider Landstar System (LSTR - Free Report) and Knight-Swift Transportation Holdings (KNX - Free Report) , as these stocks too possess the right combination of elements to beat on earnings this reporting cycle.

Landstar System has an Earnings ESP of +9.22% and is a Zacks #3 Ranked stock at present. LSTR will release first-quarter 2022 results on Apr 20.

Landstar’s first-quarter results are expected to reflect gains from an improved freight scenario in the United States. Higher truck rates, owing to tight truck capacity, are anticipated to have aided the March-quarter performance.

Knight-Swift has an Earnings ESP of +4.17% and is currently a #3 Ranked player. KNX will release first-quarter 2022 results on Apr 20.

Knight-Swift’s first-quarter results are expected to be aided by an improved freight scenario in the United States. Revenues at the Logistics segment are likely to have been strong due to an increase in load count and revenue per load.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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