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American Airlines' (AAL) Q2 Earnings Beat Estimates, Up Y/Y

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American Airlines’ (AAL - Free Report) second-quarter 2019 earnings (excluding 33 cents from non-recurring items) of $1.82 per share surpassed the Zacks Consensus Estimate by 5 cents. Moreover, the bottom line increased on a year-over-year basis. Revenues totaled $11,960 million, which were in line with the Zacks Consensus Estimate. However, the top line improved 2.7% on a year-over-year basis. Passenger revenues, which accounted for bulk of the top line (92.1%), increased 3.2%.

Total revenue per available seat miles (TRASM: a key measure of unit revenues) increased 3.5% to 16.54 cents in the reported quarter. Passenger revenue per available seat miles (PRASM) increased 4% to 15.22 cents in the second quarter. Consolidated yield increased 0.1%.

While traffic (measured by revenue passenger miles) was up 3.1%, capacity (measured by average seat miles) contracted 0.8%. Consolidated load factor (percentage of seats filled by passengers) expanded 320 basis points to 86.6% as traffic growth outpaced capacity expansion.

Total operating expenses (on a reported basis) increased 1.6% year over year to $10,807 million due to 3.4% increase in expenses pertaining to salaries, wages and benefits. Consolidated operating costs per available seat miles (CASM: excluding fuel and special items) increased 4.8% to 11.34 cents. The increase was due to lower-than-expected capacity following the prolonged grounding of Boeing 737 MAX jets and operational disruptions. Average fuel cost per gallon (on a consolidated basis: including taxes) declined 4.4% to $2.14.

Furthermore, the carrier declared a dividend of 10 cents per share. The dividend will be paid on May 22 to the shareholders of record on May 8.  

American Airlines Group Inc. Price, Consensus and EPS Surprise

 

American Airlines Group Inc. Price, Consensus and EPS Surprise

American Airlines Group Inc. price-consensus-eps-surprise-chart | American Airlines Group Inc. Quote

Q3 Outlook

TRASM is expected to increase between 1% and 3% on a year-over-year basis. Pre-tax margin excluding special items is projected in the range of 5.5-7.5% in the third quarter. Additionally, fuel costs are estimated between $2.05 and $2.10 per gallon in the third quarter. The company predicts third-quarter non-fuel unit costs to increase in the 4-6% range. Capacity is expected to grow approximately 1.5% in the third quarter of 2019.

2019 Outlook

American Airlines anticipates its current-quarter pre-tax income to be hurt to the tune of roughly $400 million due to the grounding of the Boeing 737 MAX jets. American Airlines, with 24 Boeing 737 MAX jets in its fleet, has stated that the jets would remain grounded till Nov 2.

Capacity is expected to increase 1.5%. CASM (excluding fuel, new labor deals and special items) is now anticipated to increase in 3.5-4.5% range (previous guidance was in the 2-3% band). The increase is due to the reduction in capacity following the grounding of the American Airlines’ 737 MAX fleet. The company’s capex projection for the current year stays at $4.4 billion.

American Airlines, carrying a Zacks Rank #3 (Hold), now expects 2019 earnings per share between $4.5 and $6 (earlier outlook:  $4- $6). The mid-point of the guided range ($5.25) is above the Zacks Consensus Estimate of $5.16 per share.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Investors interested in the Zacks Airline industry are keenly awaiting second-quarter 2019 earnings reports from key players like SkyWest (SKYW - Free Report) , GOL Linhas (GOL - Free Report) and Copa Holdings (CPA - Free Report) . While SkyWest is scheduled to report second-quarter results on Jul 31, GOL Linhas and Copa Holdings will do so on Aug 1 and Aug 7 respectively.

 

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