American Airlines (AAL) Q3 Earnings Top, Dip Y/Y on Cost Woes

American Airlines Group Inc.’s AAL third-quarter 2018 earnings (excluding 39 cents from non-recurring items) of $1.13 per share surpassed the Zacks Consensus Estimate of $1.12. However, the bottom line decreased on a year-over-year basis, mainly due to high fuel costs.

Revenues of $11,559 million beat the Zacks Consensus Estimate of $11,551.6 million. The top line also improved on a year-over-year basis. Strong demand for air travel led to this year-over-year improvement in the top line.

Total revenue per available seat miles (TRASM: a key measure of unit revenues) increased 2.6% to 15.4 cents in the reported quarter. Consolidated yield rose 2.2%. Passenger revenue per available seat miles (PRASM) inched up 1.8%.

American Airlines Group Inc. Price, Consensus and EPS Surprise

 

American Airlines Group Inc. Price, Consensus and EPS Surprise | American Airlines Group Inc. Quote

While traffic (measured by revenue passenger miles) was up 2.3%, capacity (measured by average seat miles) was up 2.7%. However, consolidated load factor (percentage of seats filled by passengers) contracted 40 basis points to 82.4% as traffic growth was outpaced by capacity expansion.

Total operating expenses (on a reported basis) climbed 12.4% year over year to approximately $10,910 million due to the 42.6% surge in fuel costs. Expenses pertaining to salaries and benefits were up 3.3%. Consolidated operating costs per available seat miles (CASM: excluding fuel and special items) inched up 0.8%.

During the quarter under review, this Zacks Rank #5 (Strong Sell) company returned $46 million to shareholders through dividends. Furthermore, the carrier also declared a dividend of 10 cents per share. The dividend will be paid on Nov 20 to the shareholders of record on Nov 6. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, the carrier deferred deliveries of 22 Airbus A321neos planes in a bid to reduce capital expenditures by $1.2 billion in 2019, 2020 and 2021.

Q4 & 2018 Outlook

TRASM is expected to increase in the band of 1.5-3.5% during the fourth quarter of 2018. Pre-tax margin excluding special items is projected in the range of 4.5-6.5% in the ongoing quarter. Additionally, fuel costs are estimated within $2.30-$2.35 per gallon in the current quarter. The company continues to predict CASM (excluding fuel and special items) to be flat year over year. Capacity is also unaltered at a rise of approximately 1.6% in the final quarter.

Adjusted earnings per share in 2018 are still anticipated between $4.50 and $5. The Zacks Consensus Estimate for full-year earnings is currently pegged at $4.23 per share. CASM (excluding fuel and special items) is forecast to rise approximately 1.5% in 2018. The company’s capex projection for this year remains unchanged at $3.7 billion.

Upcoming Releases

Investors interested in the broader Zacks Transportation sector are keenly awaiting third-quarter earnings reports from key players, namely SkyWest, Inc. SKYW, C.H. Robinson Worldwide, Inc. CHRW and Triton International Limited TRTN. While SkyWest and C.H. Robinson will report third-quarter earnings on Oct 30, Triton International will release the same on Nov 2.

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