American Airlines stock dives after profit outlook worsens in just one month

By Claudia Assis

American said in late-April it was about to beat Q2 expectations; United keeps guidance intact

American Airlines Group Inc. late Tuesday slashed its guidance for the current quarter, roughly one month after offering an upbeat take for the three-month period, which includes the height of summer air travel in the U.S.

The stock (AAL) dropped 7.8% in premarket trading, putting it on track to open at a six-month low.

American said it expects it will report second-quarter adjusted earnings of about $1 to $1.15 a share. That compares to a late April guidance of adjusted EPS between $1.15 and $1.45 for the quarter.

The air carrier did not detail a reason for the lowered guidance. FactSet consensus calls for adjusted earnings of $1.30 a share.

American also said its chief commercial officer, Vasu Raja, is stepping down after two years in the job, and will be replaced by Vice Chair and Chief Strategy Officer Stephen Johnson until a permanent replacement is hired.

Cowen analyst Helane Becker said the guidance cut shows that the company's focus on U.S. short haul flights is faltering. Becker said American's strategy to grow its narrow body fleet and its regional jet fleet can work, as long as other airlines aren't using larger, more comfortable aircraft in the same market.

"We think the jury is out on the plan, but pragmatically, and given the guidance update, it is apparent that the company's senior management team believe the plan is not working," Becker wrote in a note to clients. "Hence, the COO is leaving."

See also: U.S. travelers are hungry for international travel. These stocks will likely benefit.

United Airlines Holdings Inc. (UAL) also updated investors about its second-quarter guidance, with the carrier saying Tuesday it still expected adjusted EPS between $3.75 and $4.25.

American also cut its expectations for adjusted operating margin to 8.5% to 10.5%, from a previous expectation of 9.5% to 11.5%. Average fuel cost was lowered to between $2.70 a gallon and $2.80 a gallon, compared with an earlier call of $2.75 a gallon to $2.95 a gallon.

Shares of American are down 2% so far this year, contrasting with an advance of about 11% for the S&P 500 index SPX and 4.8% for the U.S. Global Jets ETF JETS.

Don't miss: Southwest Airlines is ending flights to four airports - and that's not even the big news for travelers

-Claudia Assis

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-29-24 0659ET

Copyright (c) 2024 Dow Jones & Company, Inc.