American Airlines reported better-than-expected second-quarter financials early Thursday, further confirming analyst expectations for booming profits among air carriers. The announcement follows earnings from United Airlines late Wednesday and stronger-than-forecast results from Delta Air Lines last week. AAL and UAL were mixed Thursday.
American Airlines announced profits growing more than 150% and raised its full-year earnings guidance, buoyed by strong demand for air travel and jet fuel prices. On Wednesday, United saw EPS skyrocket more than 250%.
Going into the reports, Wall Street predicted quarterly earnings up more than 100% for both United and American Airlines. Delta's financial report last week suggested airline performance was nearing pre-pandemic levels, as air carriers see strong demand for international and domestic air travel.
Delta reported international and domestic sales jumping 61% and 8%, respectively. Delta Chief Executive Ed Bastian declared "consumer demand for air travel remains robust."
Despite the strong financial performance, Delta shares dropped nearly 3% for the week as investors took profits after the earnings report. That marked the stock's first decline in nine weeks. Collectively, the 19 stocks in IBD's Transportation-Airline industry group also slipped for the week — for only the second time in nine weeks.
That could mark an inflection point, or possibly just a pause, in the overall industry rally. As a group, airlines have rallied around 47% in 2023. That's the 13th best increase among the 197 industries tracked by IBD.
United Airlines stock jumped 3.2% to 56.58 Thursday during market trade. On Wednesday, shares edged up a fraction to 54.80.
Meanwhile, American Airlines stock sank 6.2% to 17.44 Thursday. AAL edged down 0.4% to 18.60 Wednesday.
United Airlines Earnings
Estimates: Analysts expected United's profits to surge 182% to $4.03 per share with sales increasing 15% to $13.9 billion.
Results: United reported adjusted earnings of $5.03, a 252% leap over the prior year's results. Revenue also came in above target at $14.18 billion.
Fleet capacity rose 17.5% over the second-quarter 2022, and the airline said it flew the highest volume of revenue passengers since pre-pandemic. But TRASM — total revenue per seat mile — dipped 0.4%.
United Airlines stock broke out from a cup-with-handle base in late June. It pulled back, and is hovering just above the buy point of 54.05, according to MarketSmith.
Shares rallied 2.6% in premarket trade Thursday. The buy range for the cup-with-handle buy point runs to 56.75.
On Saturday, United Airlines pilots announced they reached a tentative agreement with the company on a new labor contract after more than four years of negotiations.
The proposed contract is valued at around $10 billion and would increase pay up to 40% over four years, according to the New York Times.
Last week, analysts at Argus and Jefferies both raised price targets on United Airlines stock. The firms upped its price target to 65 and 60, respectively. That's around 18% above where UAL ended on Wednesday.
United forecast Q3 earnings at $3.85 to $4.35 a share. FactSet analysts project $3.79. For the full year, United management guided expectations for adjusted profit to $11 to $12. FactSet consensus sees $10 per share.
Like many air carriers, United had a run of losses during the Covid pandemic. However, that trend has changed in recent quarters. United Airlines has seen sales grow over the past seven quarters, but profits have been mixed.
United Airlines stock has a best-possible Composite Rating of 99. The airlines stock has an 89 Relative Strength Rating, an exclusive IBD Stock Checkup gauging share-price movement. UAL has an EPS Rating of 72.
Airline Stocks: American Airlines Earnings
Estimates: Wall Street forecast AAL EPS ballooning 108% to $1.59 and revenue growing 2% to $13.73 billion.
Results: American Airlines reported revenue growing around 5% to $14.05 billion in Q2. Meanwhile, the air carrier saw profits surge 153% to $1.92 per share.
Outlook: American Airlines also raised its full-year earnings guidance to $3.00-$3.75 per share, up from the previous forecast of $2.50-$3.50 per share. The company added it expects Q3 EPS of 85 cents to 95 cents. AAL said this guidance is based on current demand trends and fuel price forecasts.
Chief Executive Robert Isom said in a statement AAL is performing at "historically strong levels."
On a daily chart, AAL also broke out from a cup-with-handle base in late June. Shares are up not quite 9% from the 16.72 entry.
American Airlines ranks seventh among the airline stocks in the Transportation-Airline industry group. AAL stock has a Composite Rating of 96. It has an 89 Relative Strength Rating. American Airlines stock has an EPS Rating of 80.
On April 20, the air carrier narrowly topped Q1 earnings estimates, with EPS of 5 cents, up from a loss of $2.32 a year ago. American Airlines missed on revenue views, with sales increasing 37% to $12.19 billion.
During the Covid pandemic, AAL had a string of nine quarterly losses before posting a profit in Q2 2022.
On Thursday, Barclays analyst Brandon Oglenski raised the firm's price target on the airlines stock to 18, up from 15. Oglenski kept an underweight rating on the shares. However, he wrote that U.S. travel demand remains robust this summer, despite prior market fears to the contrary.
The analyst added AAL's Q2 results will likely reflect solid yields and lower jet fuel prices, "suggesting strong results across the sector."
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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