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

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

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.

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.