It has been about a month since the last earnings report for American Airlines (AAL). Shares have lost about 0.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is American Airlines due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for American Airlines Group Inc. before we dive into how investors and analysts have reacted as of late.
American Airlines Misses on Earnings in Q4
American Airlines’ fourth-quarter 2025 earnings (excluding 1 cent from non-recurring items) of 16 cents per share missed the Zacks Consensus Estimate of 38 cents. In the year-ago quarter, AAL reported earnings per share of 86 cents. Operating revenues of $14 billion missed the Zacks Consensus Estimate of $14.1 billion and increased 2.5% from the year-ago number. The prolonged government shutdown hurt fourth-quarter revenues by approximately $325 million. Passenger revenues, accounting for 90.4% of the top line, increased 2.1% year over year to $12.7 billion. Cargo revenues increased 2.8% to $226 million. Other revenues increased 7.4% to $1.1 billion.
Total revenue per available seat miles (a key measure of unit revenues) decreased to 18.8 cents from 19.1 cents recorded a year ago. Passenger revenue per available seat miles decreased 2% to 17 cents. Moreover, the figure was lower than our expectation of 17.17 cents. Consolidated yield inched up 0.5% to 20.55 cents, surpassing our estimate of 20.15 cents.
Consolidated traffic (measured in revenue passenger miles) inched up 1.5% year over year. Capacity (measured in average seat miles) expanded 4.2%. Consolidated load factor (percentage of seats filled by passengers) decreased 2.2 points to 82.7%.
Total operating costs (on a reported basis) jumped 8.2% year over year to $13.5 billion, with expenses on salaries, wages and benefits growing 9.7% to $4.5 billion. The labor deal, inked with its pilots in 2023, contributed to this increase. Expenses on aircraft fuel and taxes increased 8% to $2.7 billion. Average fuel price per gallon (including related taxes) increased to $2.42 from $2.34 a year ago.
Consolidated operating costs per available seat mile (excluding fuel and special items) increased 3.7% to 14.51 cents. Fuel gallon consumption increased 4.1% to $1.11 billion in the fourth quarter of 2025. American Airlines exited the quarter with $9.2 billion of total available liquidity.
AAL’s Q1 Likely to Be Hurt by Winter Storm
The guidance indicates AAL’s preliminary estimate of the impact from the ongoing Winter Storm Fern. The storm has so far resulted in the cancellation of more than 9,000 flights. As a result, the company’s first-quarter 2026 guidance includes an approximately 1.5-point reduction to capacity, an estimated negative revenue impact of $150-$200 million and around a 1.5-point increase in non-fuel unit costs.
Management expects capacity in the first quarter of 2026 to be up 3-5% from first-quarter 2025 actuals. Total revenues are likely to be up in the 7-10% band from year-ago levels. Cost per available seat miles (adjusted) in the March quarter is expected to increase in the 3-5% range from first-quarter 2025 actuals. American Airlines expects a loss per share of 10 cents to 50 cents in the first quarter, hurt by high costs and the weather impact.
For full-year 2026, AAL expects earnings per share in the $1.7-$2.7 range. The effective tax rate expects free cash flow for 2026 to exceed $2 billion. AAL expects the 2026 adjusted nonoperating expense to be approximately $1.25 billion.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in fresh estimates.
VGM Scores
Currently, American Airlines has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock has a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, American Airlines has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
American Airlines belongs to the Zacks Transportation - Airline industry. Another stock from the same industry, United Airlines (UAL), has gained 7.6% over the past month. More than a month has passed since the company reported results for the quarter ended December 2025.
United reported revenues of $15.4 billion in the last reported quarter, representing a year-over-year change of +4.8%. EPS of $3.10 for the same period compares with $3.26 a year ago.
United is expected to post earnings of $1.31 per share for the current quarter, representing a year-over-year change of +44%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
United has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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American Airlines Group Inc. (AAL): Free Stock Analysis Report United Airlines Holdings Inc (UAL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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