American Airlines Group Inc. (AAL) is slated to report second-quarter 2014 financial results on July 24, 2014, before the opening bell.
In the previous quarter, the company’s earnings surpassed the Zacks Consensus Estimate by a margin of 8.0%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that American Airlines Group is likely to beat earnings because it has the perfect combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.03%. This is because the Most Accurate estimate stands at $1.96, whereas the Zacks Consensus Estimate is pegged at $1.94. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: American Airlines Group currently has a Zacks Rank #1 (Strong Buy). Note that stocks with Zacks Rank #1, 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings estimates. Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of American Airlines Group’s Zacks Rank #1 and +1.37% ESP makes us reasonably confident of a positive earnings beat on July 24.
What is Driving the Better-than-Expected Earnings?
We expect impressive second-quarter numbers from American Airlines Group based on the company’s healthy revenue passenger miles (RPMs) and available seat miles (ASMs) figures in the months of April, May and June. The company has generated RPMs of 18.1 billion in April, up 4.7% from the same month in 2013; 19.2 billion in May, up 2.1% from May 2013; and 19.9 billion in June, up 1% from June 2013.
For the second quarter of 2014, the company expects consolidated passenger revenue per available seat mile (PRASM) to increase in the range of 5.5% to 6.5% year over year.
Other Stocks to Consider
Here are other companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:
Alaska Air Group, Inc. (ALK) has an earnings ESP of +0.92% and sports a Zacks Rank #1.
JetBlue Airways Corporation (JBLU) has an earnings ESP of +5.26% and sports a Zacks Rank #2.
United Continental Holdings, Inc. (UAL) has an earnings ESP of +1.80% and carries a Zacks Rank #2.
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