One of America’s largest air carriers, American Airlines (NASDAQ: AAL), posted mixed second-quarter fiscal 2022 results, pushing the stock down over 9% on the news. American Airlines missed earnings expectations while revenue exceeded expectations. Although the air carrier did rope in an adjusted profit for the first time since the onset of the pandemic. Furthermore, the company expects to be profitable in the third quarter.
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AAL CEO, Robert Isom, said, “The American Airlines team has stepped up to meet the surge in demand for air travel while running a reliable operation in very challenging conditions. We are encouraged by the trends we’re seeing across the business, and we remain well-positioned for the continued recovery.”
Notably, the company also reiterated its goal of reducing its overall debt levels by $15 billion by the end of 2025. AAL stock closed down 7.4% at $14.08 on July 21.
AAL’s Mixed Q2 Results
American Airlines posted adjusted earnings of $0.76 per share, which came in one cent lower than the consensus. Nonetheless, the figure was much better than the prior-year quarter’s adjusted loss of $1.69 per share.
On the bright side, AAL posted a historically high revenue of $13.42 billion, which beat analyst estimates by $20 million. The company’s revenues gained a whopping 79.5% compared to Q2FY21. The revenue also showed a jump of 12.2% compared to the same period in 2019.
Based on the current demand momentum and operational capabilities, AAL expects third-quarter revenue to come in 10% to 12% higher compared to the same quarter of 2019, that too, on an 8% to 10% lower capacity.
Key Metrics Show a Boost
Compared to the same period last year, AAL’s key metrics witnessed a solid boost due to the strong summer travel demand and better managed operating capabilities. Available seat miles (ASM) rose 21.3%, and the passenger load factor grew by 9.9 points. Similarly, total revenue per ASM (TRASM) advanced by 48%.
Hold Rating for AAL
AAL stock has a Hold consensus rating based on one Buy, eight Holds, and four Sells. The average American Airlines price forecast of $17.23 implies 22.4% upside potential to current levels. Meanwhile, the stock has lost 24.9% so far this year.
Investors Are Neutral about AAL
Notably, TipRanks’ Stock Investors tool shows that investor sentiment is currently Neutral on American Airlines, with 1.0% of portfolios tracked by TipRanks increasing their exposure to AAL stock over the past 30 days.
Ending Notes
The June quarter was marred by a slew of flight delays and cancellations across airlines. Despite the current macroeconomic headwinds and sector-related challenges, including crew shortages and rising fuel costs, American Airlines did a commendable job by robustly growing its revenue and earnings. The solid summer season travel demand also provided a boost to the airline.
However, both analysts and retail investors remain wary of the airline industry. It will be interesting to see how American Airlines holds its own in times of an uncertain short-term outlook with summer ending and fears about the recession growing stronger.
