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Tale of the Tape

Zacks Equity Research

Should You Buy American Airlines (AAL) Ahead of Earnings?
October 18, 2016

AAL

Trades from $3

Investors are always looking for stocks that are poised to beat at earnings season and American Airlines Group Inc. (AAL - Free Report) may be one such company. The firm has earnings coming up pretty soon, and events are shaping up quite nicely for their report.

That is because American Airlines is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat. After all, analysts raising estimates right before earnings—with the most up-to-date information possible—is a pretty good indicator of some favorable trends underneath the surface for AAL in this report.

In fact, the Most Accurate Estimate for the current quarter is currently at 1.71 cents per share for AAL, compared to a broader Zacks Consensus Estimate of 1.66 cents per share. This suggests that analysts have very recently bumped up their estimates for AAL, giving the stock a Zacks Earnings ESP of 3.01% heading into earnings season.

AMER AIRLINES Price and EPS Surprise

 

AMER AIRLINES Price and EPS Surprise | AMER AIRLINES Quote

Why is this Important?

A positive reading for the Zacks Earnings ESP has proven to be very powerful in producing both positive surprises, and outperforming the market. Our recent 10 year backtest shows that stocks that have a positive Earnings ESP and a Zacks Rank #3 (Hold) or better show a positive surprise nearly 70% of the time, and have returned over 28% on average in annual returns (see more Top Earnings ESP stocks here).

Given that AAL has a Zacks Rank #3 (Hold) and an ESP in positive territory, investors might want to consider this stock ahead of earnings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Clearly, recent earnings estimate revisions suggest that good things are ahead for American Airlines, and that a beat might be in the cards for the upcoming report. 

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