US earnings forecasts: American Airlines price discounts low Q3 earnings expectations

[MongiIG]

Operating conditions for the American Airlines Group have deteriorated, leading to the downgrade in earnings expectations.

Source: Bloomberg

 

Shares American Airlines Price American Airlines Group Technical analysis Market trend

 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Monday 16 October 2023 18:16

Key Takeaways:

1. American Airlines is scheduled to release its quarterly earnings results on October 19
2. The company and analysts have downgraded Q3 earnings expectations
3. Several factors, including rising fuel and labor costs, as well as softer demand assumptions, have contributed to the deterioration of American Airlines' operating conditions.
4. American Airlines has an average broker rating of ‘neutral’ although trades at a discount to the long-term average price target for the company
5. The share price of American Airlines Group is oversold currently, although the short to medium term trends are considered down

When are American Airline results expected?

American Airlines Group (NASDAQ:AAL) is set to release its quarterly earnings results on Thursday, October 19th, before market open.

American Airlines earnings preview, what does ‘The Street’ expect?

While the American Airlines Group provided an optimistic outlook for third quarter earnings per share of between $0.85 and $0.95 after their Q2 2023 results, these figures have since undergone a sharp downward revision by the company to between +$0.20 and $0.30.

A consensus of analyst and broker expectations as per a Refinitiv data poll (as of the 16th of October 2023) suggest the following from the upcoming Q3 results:

• Revenue $13.515bn (+0.39% year on year)
• Earnings per share $0.25 (-63.47% year on year)

The operating conditions for American Airlines have deteriorated, leading to the downgrade in earnings expectations. Several factors have contributed to this, including rising fuel and labour costs and softer demand assumptions. For example, in August, the company recognized a $230m cost in settling with the Airline Pilots Association.

How to trade the American Airlines Q3 2023 results

Source: IG TipRanks

IG’s TipRanks smartscore (available on the IG platform) suggests that American Airlines Group is a ‘hold’ with a long-term average price target of $16.17 a share, as of the 16th of October 2023.

Public sentiment is considered bullish although over the last quarter there has been some net selling of the stock by hedge funds.

 

Source: IG

From a technical analysis perspective, the short to medium term trend momentum is down now, with the price now testing the 11.85 support level. A close below this level would suggest 10.95 as short-term downside target from the move. In this scenario, traders who find short entry, might consider using a close above 12.85 as a stop loss consideration for the trade.

10.95 becomes a critical support level should it be tested, as there is not much in the way of historical support thereafter until the 9.05 level.

Traders who prefer looking for long entry might instead hope to see a rebound from oversold territory and move / close above the 12.85 resistance level before considering new positions.

 

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.