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American Airlines Falls Short of Investor Expectations


American Airlines (AAL) announced its second-quarter earnings, which were impressive but failed to meet investor expectations. The carrier exceeded earnings forecasts and achieved a record revenue, following in the footsteps of Delta Air Lines (DAL) and United Airlines (UAL) by increasing its full-year guidance.

However, despite these positive results, American’s shares dipped by 2.9% before the market opened. In contrast, shares of United Airlines, which reported record earnings the previous day, experienced a 2% increase.

The correlation between the performance of these two airline stocks is evident. Delta’s strong earnings from last week and United’s outstanding results exerted additional pressure and raised expectations for American’s earnings. The ongoing rally in airline stocks, driven by robust international travel demand and lower fuel costs, has set a high standard for the industry.

Since Memorial Day weekend in May, American’s stock has climbed an impressive 35%. After United surpassed expectations with earnings of $5.03 per share, $1 above forecasts, American had to deliver outstanding results.

However, American Airlines’ adjusted earnings for the three months ending June 30 stood at $1.92 per share, with revenue amounting to $14.1 billion. Nevertheless, the carrier raised its full-year earnings guidance to a range of $3 to $3.75 per share, compared to the previous range of $2.50 to $3.50.

American Airlines Falls Short of Earnings Expectations in Q2

American Airlines has reported its second-quarter earnings per share (EPS), falling short of analysts’ expectations. While analysts anticipated an EPS of $1.59 on sales of $13.7 billion, American’s own guidance projected earnings between $1.20 and $1.40 per share.

Looking ahead to the third quarter, American foresees a noticeable deceleration in EPS, estimating it to be between $0.85 and $0.95. Although this aligns with the expected EPS of $0.91, meeting estimates alone is no longer sufficient.

In regards to pilot pay, American’s management has expressed their intention to match the wages offered by United Airlines, which recently reached a tentative agreement with its pilot union for a substantial pay increase of up to 40% over four years. While American’s tentative agreement was reached back in May, pilots are expected to vote on it later this month, and adjustments to the agreement seem likely given United’s recent deal.

According to a statement from the company, American attributed its strong revenue performance to continued broad-based demand strength and its impressive completion factor performance throughout the quarter. The company also acknowledged that demand was particularly robust in June, driven by a surge in close-in bookings or last-minute ticket purchases.

While the overall outlook remains positive for the three largest U.S. carriers, American Airlines has fallen slightly short of the market’s lofty expectations.

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