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American Airlines (AAL) Up on Improved Q4 Revenue Guidance

American Airlines AAL improved its expectations for fourth-quarter 2021 total revenues despite multiple flight cancellations during the Christmas and New Year holiday travel period. This, in turn, drove shares of the company up 1.2% at the close of business on Jan 11.

Per a SEC filing dated Jan 11, American Airlines now expects total revenues to decline approximately 17% in the fourth quarter of 2021 from the comparable period in 2019. Previously, the airline estimated the same to decrease around 20%.

However, due to mass-scale flight cancellations during the Christmas travel period through the end of the year, American Airlines now predicts capacity to decline 13% in the fourth quarter from the 2019 level, compared with the previous expectation of a decrease of 11-13%. The flight cancellations resulted from staffing shortages as a large number of pilots and flight attendants fell sick with COVID-19, thanks to the emergence of the Omicron variant. Severe winter weather in parts of the United States also caused flight cuts. The schedule cuts were not just limited to American Airlines. Other U.S. carriers were equally affected by the spike in Omicron cases and inclement weather conditions.


Due to reduced capacity, AAL incurred higher costs. It now expects cost per available seat mile to increase 13-14% in the fourth quarter from the 2019 level. Previously, the carrier estimated the same to increase 8-10%. Apart from reduced capacity, a holiday operational incentive program in the fourth quarter and a write down of excess spare parts inventory pushed up the company’s unit costs.

American Airlines estimates average fuel price per gallon to be $2.36 for the fourth quarter, compared with the previous expectation of $2.43-$2.48. Pre-tax margin, excluding net special items, is expected to be between -12% and -13% (past forecast: between -16% and -18%).

American Airlines expects total liquidity of approximately $15.8 billion at the end of the fourth quarter.

Zacks Rank & Key Picks

American Airlines carries a Zacks Rank #4 (Sell).

Some better-ranked stocks within the broader Transportation sector are as follows:

Expeditors International of Washington EXPD carries a Zacks Rank #1 (Strong Buy). The company has a stellar earnings surprise history. It has outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 29.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Expeditors have appreciated around 32% in a year.

ArcBest Corporation ARCB carries a Zacks Rank #2 (Buy). The company’s earnings have outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 27.4%.

Shares of ArcBest have surged more than 100% in a year.

Schneider National SNDR carries a Zacks Rank #2. The company’s earnings have trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 21%.

Shares of Schneider National have rallied more than 17% in a year.


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Schneider National, Inc. (SNDR): Free Stock Analysis Report
 
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