American Airlines’ second-quarter earnings were good, but they weren’t quite good enough in the eyes of investors.
The carrier beat earnings expectations, posted record revenue, and followed Delta Air Lines (ticker: DAL) and
United Airlines
(UAL) in hiking full-year guidance.
But that hat-trick failed to lift American’s (AAL) shares, which pointed 2.9% lower ahead of the open. In contrast, shares in United Airlines, which reported record earnings late Wednesday, climbed 2%.
The fortunes of the two stocks are likely linked. Strong earnings from Delta last week and United last night placed more pressure, and expectation, on American’s earnings. The airline stock rally, inspired by strong international travel demand and lower fuel costs, has also raised the bar.
American stock has climbed 35% since May 24, the Wednesday before Memorial Day weekend, which kick-started the strong summer season. After United’s record earnings of $5.03 per share, a whole $1 above expectations, American’s needed to be great.
They were only very good.
American
reported adjusted earnings of $1.92 a share on revenue of $14.1 billion in the three months ended June 30. The carrier raised full-year earnings guidance to between $3 and $3.75 a share, up from a previous $2.50 to $3.50 range.
Analysts were expecting second-quarter earnings per share (EPS) of $1.59 on sales of $13.7 billion. American’s own guidance was for earnings of between $1.20 and $1.40 a share.
For the third quarter, American sees EPS of between $0.85 and $0.95, a noticeable deceleration from the second quarter. That’s in line with expectations for $0.91—but matching estimates isn’t enough.
On the issue of pilot pay, American’s management said they intend to match the wages offered by United—which reached a tentative agreement with its pilots union Saturday over a deal to hike pay by up to 40% over four years.
American’s own tentative agreement was reached in May, and pilots are due to begin voting on it later this month. But now it seems likely the agreement will be adjusted.
“The strong revenue performance was driven by continued broad-based demand strength and American’s completion factor performance in the quarter,” the company said in a statement. It added that demand was particularly strong in June, driven by a jump in close-in bookings or tickets booked at short notice.
The outlook is still good for the three largest U.S. carriers. American’s results just didn’t quite meet lofty expectations.
Write to Callum Keown at [email protected]
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