American Airlines Hike’s Profit Guide. Why the stock is falling.
American Airlines Group shares fell 9.2% in Wednesday morning trading after the company’s updated earnings outlook fell short of expectations for the first quarter.
American Airlines (ticker: AAL) said it expects to post adjusted earnings per share of between one and five cents when it reports earnings later this month. That’s an improvement over previous guidance of roughly break-even, but it fell short of analysts’ expectations of five cents a share, according to FactSet data.
“Overall, estimates have been higher in recent weeks, although it appears that some estimates were too aggressive,” Cowen analysts, led by Helane Becker, wrote on Wednesday. They updated their own estimates on American Airlines to a profit of four cents a share from a loss of six cents a share.
The airline also said it expects total revenue per available seat mile (TRASM) – an industry-wide metric – to rise 25.5% compared to the first quarter of 2022, at the midpoint of its previous guidance of 24-27%.
American is expected to report first-quarter earnings on April 20. “The key on that day will be forward guidance, which should be quite robust, even with the accrual of labor contracts that they may discuss,”[ads1]; the Cowen team said.
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Delta Air Lines ( DAL ) will be the first airline to report first-quarter earnings on Thursday, with the focus for investors likely to be on whether demand can remain strong into the summer months and, in particular, on guidance for the second quarter.
After an impressive start to the year, the airline’s shares have slumped over the past month as a number of factors, including regional banking turmoil and higher oil prices, have hurt sentiment. The
NYSE Arca Global Airline Index
rose more than 16% in the first three months of 2023, but has fallen 7.5% since then.
Write to Callum Keown at callum.keown@barrons.com