[ad_1]
American Airlines Group (NASDAQ: AAL ) has returned to profitability after a long period in negative territory, following the travel ban related to COVID. The aviation giant is expected to regain most of its lost momentum this year, helped by steady passenger traffic.
After trading below its long-term average last year, American Airlines shares entered 2023 on a high note, gaining about 33% in the first two weeks. Previously, it has been traded at the lowest price for two years since the middle of 2022. There will be a natural urge among investors to make use of the new dip in value, which is justified to a large extent.
Savings
However, there are risks such as pressure on public spending due to inflation and interest rate hikes. It is estimated that the stock will trade sideways until passenger traffic fully recovers and is a less attractive investment option, from a short-term perspective.
American Airlines Group Inc. Transcript of Q3 2022 Earnings Call
Reflecting the positive outlook for air travel, after a relatively weak holiday season, management recently raised its guidance for fourth quarter revenue growth to 16-17%, compared to the same period in 2019. Its earnings per share guidance has been raised sharply to $1, 12-1.17, while continuing to expect Q4 capacity to decrease by 6.1%. It looks like the company is on track to achieve its goal of significantly reducing debt by 2025, using the additional cash it expects to generate. Currently, total debt remains higher than pre-COVID levels.
JetBlue deals
Going forward, a potential growth catalyst will be the company’s planned alliance with JetBlue Airways — if that deal gets antitrust clearance from regulators. After the deal, JetBlue will add more routes from New York, Boston, and Los Angeles, which will contribute to the profits of Americans Airlines. Meanwhile, the company remains committed to its strategy of simplifying legs and focusing on flights on profitable routes.
In its most recent quarter, American Airlines turned a profit from a year-ago loss, marking its second straight quarter of profit after three straight losses. At $0.69 per share, adjusted earnings also beat expectations after missing in the previous quarter. The bottom line got a boost from 50% growth in operating revenue to $13.5 billion.
Finance
The company will publish results for the last three months of 2022 on January 26 before the opening bell. Indicating that the recovery will continue, market watchers are predicting a profit of $0.83 per share for the fourth quarter, on revenue of $12.95 billion. However, analysts are not as bullish as management as they are skeptical about the company’s ability to maintain momentum in the long term.
From American’s Q3 2022 earnings conference call:
“Leisure and business revenues remained strong again exceeding 2019 levels in the third quarter. Demand for small and medium-sized businesses and customers traveling for a combination of business and leisure continued to outpace the recovery of managed corporate travel. As these revenues continue to grow, they will be an addition to basic business demand that is already strong, let’s say, small and medium businesses and mixed travel.
Southwest Airlines: A look at the airline’s limited plans for the near future
On Tuesday, American Airlines shares traded slightly above $17, continuing a recent recovery. Current values are close to the levels seen a year ago.
[ad_2]
Source link