American Airlines AAL is set to release its fourth-quarter 2024 results on Jan. 23, before market open.
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The Zacks Consensus Estimate for fourth-quarter 2024 earnings has been revised 60% upward in the past 60 days and is pegged at 64 cents per share. Additionally, the consensus mark implies a 120.7% uptick from the year-ago actual. The Zacks Consensus Estimate for fourth-quarter 2024 revenues is pegged at $13.4 billion, indicating a 2.7% upside from the year-ago actual.
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AAL has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark in the remaining quarter, the average beat being 124.4%.
American Airlines Group Inc. Price and EPS Surprise
American Airlines Group Inc. price-eps-surprise | American Airlines Group Inc. Quote
Q4 Earnings Whispers for AAL
Our proven model predicts an earnings beat for AAL 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 an earnings beat, which is the case here.
The company's Earnings ESP is +3.99%. This is because the Most Accurate Estimate currently stands at 66 cents per share, higher than the Zacks Consensus Estimate of 64 cents. AAL currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors to Note
Low fuel costs are expected to have aided AAL’s bottom-line performance in the December quarter. We expect fuel price per gallon in the December quarter to be $2.3. Our estimate indicates a 24.9% decline from the year-ago actuals.
High labor costs are likely to have hurt the bottom line. Management expects non-fuel unit costs (adjusted) in the fourth quarter of 2024 to increase in the 5-6% band. Our estimate indicates a 5.6% year-over-year increase in the fourth quarter of 2024.
Upbeat passenger volumes are expected to have boosted AAL’s top-line performance in the December quarter. Notably, the majority of passenger revenues are likely to have come from domestic markets. Having said that, international passenger revenues are also likely to have been strong in the quarter to be reported, with demand for international flights being robust. Favorable pricing is also likely to have boosted revenues in the to-be-reported quarter.
AAL’s Price Performance & Valuation
Driven by upbeat air travel demand, AAL shares have gained in double digits in the December quarter, handsomely outperforming its industry and peer Delta Air Lines DAL in the three-month period. Another airline operator, United Airlines UAL has performed even better.
Q4 Price Performance
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From a valuation perspective, American Airlines is trading cheaper than the industry. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.21X, much lower than the industry average of 1.18X. The company has a Value Score of A.
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Investment Thesis for AAL
Improvement in air travel demand following the end of the pandemic bodes well for American Airlines' top line. While air travel demand is particularly strong on the leisure front, business travel has also made an encouraging comeback.
American Airlines is well-positioned for continued success in 2025. With air travel demand expected to remain healthy, AAL stock should continue to perform well. Donald Trump's re-election is a positive for the airline industry and is expected to lead to a return to the pro-business stance that characterized his first term. Low fuel costs also bode well. However, high labor costs weigh on its bottom line.
Final Thoughts on AAL’s Q4 Outcome
AAL is set for an impressive fourth-quarter performance, backed by strong passenger revenues and low fuel costs. Despite high labor costs, AAL’s commitment to improving efficiency reinforces its growth outlook, making it a compelling investment option ahead of earnings.
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Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
