American Airlines Group (AAL), which came into being following the Dec 2013 merger of AMR (American Airlines' parent group) and US Airways, performed well in the final quarter of 2014 reporting higher-than-expected earnings and revenues. The company recorded adjusted earnings per share of $1.52, beating the Zacks Consensus Estimate by a penny.
American Airlines Group reported adjusted revenues of $10.2 billion in the fourth quarter of 2014, representing a 2.1% increase over the comparable figure (American Airlines Group [formerly AMR Corporation] on a stand alone basis combined with the results of US Airways Group) in the year-ago period. Quarterly revenues were marginally higher than the Zacks Consensus Estimate of $10.14 billion
Consolidated passenger revenue per available seat miles (PRASM) declined 1% to 13.50 cents in the reported quarter. Consolidated passenger yield climbed 0.9% to 16.84 cents. Load factor (% of seats filled by passengers) declined to 80.1% from the combined figure of 81.7% a year-ago. Weakness in the Atlantic and Latin American areas contributed to the decline in load factor.
American Airlines Group’s results in the reported quarter benefited from low fuel costs. This is because fuel costs account for a major chunk of an airline's operating expenses. Total operating costs in the final quarter of 2014 declined 4.1% to $9.3 billion from the year-ago figure (combined). A 17.3 % decrease in consolidated fuel cost in the fourth quarter of 2014 led to the fall in operating expenses.
The company looks to reward shareholders by paying dividends and repurchasing shares. During the final quarter of the year, the company returned $959 million to its shareholders by paying $72 million in quarterly dividends and buying back common stock worth $887 million. The carrier said that it has completed its $1 billion share buyback program (announced in Jul 2014) a year ahead of schedule.
Following the completion, the company announced another share repurchase program worth $2 billion. The newly authorized program is expected to be completed by Dec 31, 2016. The company also declared a dividend of 10 cents per share. The dividend will be paid on Feb 23, 2015, to stockholders as of Feb 9.
For full year 2014, the company recorded adjusted earnings of $5.70 per share on revenues of $42.7 billion. This compares favorably with the Zacks Consensus Estimate for 2014 which hinted at earnings of $5.68 per share on revenues of $42.63 billion.
Upcoming Release
JetBlue Airways Corporation (JBLU) will release its fourth quarter earnings numbers on Jan 29, 2015. We expect the carrier to report better-than-expected earnings in the quarter. The company, apart from carrying a Zacks Rank #1 (Strong Buy), also possesses a positive Earnings ESP.
According to our model, a stock needs to have both a positive earnings ESP and a Zacks Rank #1, 2 (Buy) or 3 (Hold) for us to confidently predict an earnings beat. Moreover, we expect JetBlue’s quarterly results to benefit from weak fuel costs, as has been the case for American Airlines Group and most of its peers in the airline space who have already reported fourth-quarter 2014 results.
Zacks Rank
American Airlines Group currently sports a Zacks Rank #1 (Strong Buy). Equally-well ranked stocks in the industry include United Continental Holdings (UAL) and Delta Air Lines, Inc. (DAL).
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