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American Airlines (AAL) Q4 Earnings Top Estimates, Up Y/Y

Zacks Equity Research
Updated

American Airlines Group Inc.’s AAL fourth-quarter 2017 earnings (excluding 41 cents from non-recurring items) of 95 cents per share surpassed the Zacks Consensus Estimate by 3 cents. Quarterly earnings increased 3% on a year-over-year basis despite higher costs. Results were aided by higher revenues.

Revenues of $10,600 million were 8.3% above the year-ago figure. The Zacks Consensus Estimate for fourth-quarter revenues of $10,581.1 million. Strong demand for air travel coupled with improving yields drove the top line in the quarter under review.

Total revenue per available seat miles (TRASM: a key measure of unit revenue) improved 5.6% to 15.74 cents in the reported quarter. In fact, this quarter marked the fifth successive one in which the metric grew on a year-over-year basis, since the fourth quarter of 2014.

Consolidated yield improved 4.4%. Passenger revenue per available seat miles improved 5.4%. While traffic (measured by revenue passenger miles) was up 3.5%, capacity (measured by average seat miles) was up 2.5%. Consolidated load factor (percentage of seats filled by passengers) increased to 82.1% from 81.4% a year-ago as traffic growth outpaced capacity expansion in the final quarter of 2017.

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Total operating expenses climbed 9.8% year over year to $9.9 billion primarily due to the rise in fuel costs. Expenses pertaining to salaries and benefits were up 7%. Consolidated operating costs per available seat miles (CASM: excluding fuel and special items) increased 3.8%.

During 2017, the company returned $1.7 billion to shareholders through dividends and buybacks. Furthermore, the carrier also declared a dividend of 10 cents per share. The dividend will be paid on Feb 20, to the shareholders on Feb 6. We are impressed by the company’s efforts to reward shareholders through stock repurchases and dividend payments.

Meanwhile, the carrier remains focused on introducing new aircraft and retiring old ones from its fleet. In fact, keeping in with its aim to modernize its fleet, the carrier invested $4.1 billion during 2017 in new aircraft.

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

 

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

 

Outlook

TRASM is expected to increase in the band of 2% to 4% in the first quarter of 2018. Pre-tax margin excluding special items is projected in the range of 2% to 4%. Adjusted earnings per share in 2018 are expected between $5.50 and $6.50. The Zacks Consensus Estimate for 2018 earnings is currently pegged at $5.14 per share.

Consolidated CASM (excluding special items and fuel) is expected to increase 4% in the first quarter of 2018. The metric is also anticipated to increase approximately 2% in 2018. The metric is expected to increase in the band of 1% to 2% in each of 2019 and 2020. Capacity (system) in 2018 is projected to increase 2.5% year over year.

Upcoming Releases

Investors interested in the Zacks Airline industry are keenly awaiting fourth-quarter earnings reports from key players like Hawaiian Holdings HA , Allegiant Travel Company ALGT and Spirit Airlines SAVE in the coming days. While Hawaiian Holdings is scheduled to report on Jan 29, Allegiant and Spirit Airlines are scheduled to do the same on Jan 31 and Feb 6, respectively.

Zacks Rank

American Airlines carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Zacks Investment Research