American Airlines Group Inc (NASDAQ:AAL)
Recent events have resulted in American Airlines, one of the most successful airlines in the world, increasing its profit guidance. Despite this, the stock continues to decline. What might possibly be causing this? In this piece, we will investigate the factors that may have contributed to the occurrence of this phenomenon.
The updated profit projection provided by American Airlines Group was below market expectations for the first quarter, which resulted in the stock price of American Airlines Group falling by 9.2% during trading on Wednesday morning.
When it comes time to report earnings later this month, American Airlines (NASDAQ:AAL) has stated that it anticipates posting adjusted earnings per share of between one and five cents. According to the statistics provided by FactSet, while this is an increase from the company’s earlier projection of breaking even, it is still below the expectations of five cents per share held by industry analysts.
Cowen analysts under the direction of Helane Becker stated on Wednesday that “it appears as though some estimates were too aggressive,” despite the fact that “in general, estimates have been trending higher over the past few weeks.” They revised their previous projections for American Airlines to show a profit of four cents per share, up from their previous projection of a loss of six cents per share.
In addition, the carrier stated that it anticipates total revenue per available seat mile (TRASM), which is a metric used across the industry, to increase by 25.5% when compared with the first quarter of 2022. This figure falls in the middle of the carrier’s previous projection range of 24%-27%.
On April 20th, it is anticipated that American will release its financial report for the first quarter. “The key that day will be forward guidance, which should be fairly robust, even with the accruals for labor contracts that they may discuss,” the Cowen team said. “The key that day will be forward guidance.”
On Thursday, Delta Air Lines (NYSE:DAL) will be the first airline to report its earnings for the first quarter. Investors will likely be focusing on whether demand can remain high heading into the summer months and, in particular, on the airline’s outlook for the second quarter.
Following a strong beginning to the year, airline stock prices have declined over the past month for a variety of reasons. Chief among them is the upheaval in regional banking and the rise in oil costs, both of which have had a negative impact on investor mood. After a rise of more than 16% in the first three months of 2023, the NYSE Arca Global Airline Index has seen a decline of 7.5% in the subsequent months.
American Airlines has raised its profit forecast. Why Is the Stock Continuing to Fall?
Recent events have resulted in American Airlines, one of the most successful airlines in the world, increasing its profit guidance. Despite this, the stock continues to decline. What might possibly be causing this? In this piece, we will investigate the factors that may have contributed to the occurrence of this phenomenon.
Recent financial performance
The COVID-19 epidemic, which has had a significant negative effect on the airline sector as a whole, has caused American Airlines to experience financial difficulties. In spite of this, the company has been exhibiting some signs of improvement over the past few months. The corporation declared a net profit of $19 million for the second quarter in July 2021, which was a significant improvement from the net loss of $2.1 billion that it had incurred during the same time period the previous year.
A Rise In The Number Of People Taking Flights
The pandemic induced by COVID-19 has resulted in a considerable decrease in the demand for air travel. On the other hand, there has been a consistent recovery in the demand for air travel due to the rising vaccination rates and the easing of travel restrictions. The considerable increase in bookings that American Airlines has seen recently has led to greater predictions for the airline’s income.
Cost-Saving Measures
In reaction to the pandemic, American Airlines has implemented a number of cost-cutting initiatives across the company. The company has been able to strengthen its financial situation and lower its expenses as a direct result of these actions.
The Recovery of the Business Travel Market
In the wake of the pandemic, one of the areas of the airline sector that has been affected most hard is business travel. In spite of this, there has been a gradual resurgence in business travel as a result of the relaxation of travel restrictions and the opening back up of the economy. The company’s increased financial performance can be attributed, in part, to the rise in the number of bookings for business travel that American Airlines has received.
What Could Be Causing the Stock To Drop?
In spite of the excellent news regarding the company’s financial performance, the stock price of American Airlines has been going down, and in this section, we will investigate the causes of this fall.
Concerns About Rising Fuel Costs
Fuel costs are a significant expense for airlines, and any increase in fuel prices can negatively impact their financial performance. There have been concerns about rising fuel costs, which could erode the company’s profitability.
Competition From Low-cost Carriers
American Airlines faces stiff competition from low-cost carriers like Southwest Airlines and JetBlue. These airlines have been able to offer lower prices and capture market share from traditional airlines like American Airlines. This competition could impact American Airlines’ revenue and profitability.
Fear of a New COVID-19 Wave
There are concerns that a new wave of COVID-19 infections could impact air travel demand once again. This fear has led to a decline in the stock prices of many airlines, including American Airlines.
Featured Image: Unsplash @ Miguel Ángel Sanz
