American Airlines is set to report its Q2 2024 results, with revenue expected to come in slightly above the consensus estimate at $14.5 billion, marking a 3% year-over-year growth. Earnings per share are anticipated to be $1.15 on an adjusted basis, surpassing the consensus estimate of $1.06 and aligning with the higher end of the company’s guidance. Despite a stock performance that has seen a 25% decline over the past three years, American Airlines is forecasted to be undervalued with a potential upside of over 30%, based on a 6x P/E multiple and expected full-year earnings of $2.49 per share in 2024.
Looking back at the previous quarter, American Airlines saw a 3% year-over-year increase in revenue to $12.6 billion, driven by an 8.5% rise in available seat miles. However, passenger revenue per available seat mile fell by 5% due to lower yields, resulting in an adjusted operating income margin decline to 0.6% in Q1’24 compared to 3.7% in the prior-year quarter. This led to an adjusted loss per share of $0.34 in Q1’24, in contrast to a $0.05 profit in Q1’23.
In the upcoming quarter, American Airlines is expected to continue benefiting from strong travel demand, although no change in available seat miles is forecasted compared to the previous year. The average fuel price is projected to increase to around $2.75 per gallon from $2.62 in the prior-year quarter, affecting the company’s adjusted operating income margin, which is estimated to be between 8.5% and 10.5% in Q2. Adjusted earnings for the quarter are anticipated to fall within the range of $1.00 to $1.15, according to the company’s guidance.
While American Airlines is seen as undervalued, it is essential to compare how the company’s peers are faring on key metrics. Peer comparisons across industries provide valuable insights for investors. In a challenging macroeconomic environment with high oil prices and elevated interest rates, American Airlines’ ability to outperform the S&P 500 remains uncertain. However, the company’s potential for growth and recovery cannot be overlooked, as evidenced by its financial performance and expectations for the upcoming quarter.
In conclusion, American Airlines’ upcoming Q2 2024 results are anticipated to reflect the current market conditions and the company’s ability to navigate challenges in the aviation industry. With an undervalued stock and potential for growth, investors will be closely watching the earnings report to gauge the company’s performance and outlook for the remainder of the year. As the aviation sector continues to evolve, American Airlines’ strategic decisions and financial management will play a crucial role in determining its future success in the competitive market.
