Yahoo Finance American Airlines merger integration helps beat analyst estimates
Lower fuel price, merger success lift American Airlines in 2014 (Part 8 of 10)
Adjusted EPS higher than estimates
American Airlines’s adjusted EPS (or earnings per share) exceeded analyst estimates by 0.5% in 4Q14. Adjusted EPS is calculated after adjusting for extraordinary income and expenses. Although Wall Street analysts estimated American Airlines’s 3Q14 adjusted EPS to be $1.51, the actual adjusted EPS was $1.52.
American Airlines made significant progress in integrating its operations with US Airways a year ago. American’s GAAP EPS was $0.82, lower than analyst estimates of $1.48. The airline combined operations at 106 airports since the merger, fully integrated the cargo division, and it plans to combine the loyalty programs in fiscal 2015.
Estimate for 1Q15
Analysts estimate American’s 1Q15 adjusted EPS to be $1.81, compared to $0.54 recorded in 1Q14. Revenue is estimated at $9,916 million, a year-over-year (or YoY) decline of 0.8%, compared to American’s 1Q14 revenue of $9,995 million. Operating profit is estimated to be $1,517 million, more than twice that of 1Q14.
American’s operating income in 1Q14 was $730 million. Adjusted net income is estimated to increase to $1,270 million in 1Q15 from $402 million in 1Q14. Moreover, 17 of the 19 Wall Street analysts who cover American Airlines recommended a buy, and the rest gave a hold recommendation with an upside target of 45% from the current market price.
All of American’s peers except United Continental Holdings (UAL) exceeded analyst estimates in 4Q14. However, JetBlue Airways’s (JBLU) earnings surprise of 8.8% was the highest among its peers. JetBlue was followed by Southwest Airlines’s (LUV) 6.9%, Delta Air Lines’s (DAL) and Alaska Air Group’s (ALK) 1.4%, and American Airlines’s (AAL) 0.5%.
ETFs such as the SPDR S&P Transportation ETF (XTN) and the iShares Transportation Average ETF (IYT) hold airline stocks.
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