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How Analysts View American Airlines in 3Q17

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Revenue growth

Wall Street analysts expect American Airlines (AAL) to see revenue growth in 2017 after declining in 2016. For 3Q17, its revenues are estimated to grow 4.0% year-over-year (or YoY) to $11.0 billion. This trend is expected to lead to 4.7% YoY growth for 4Q17 to $10.2 billion.

Analysts expect this trend to lead to fiscal 2017 revenue growth of 4.5% year-over-year to $41.9 billion. For 2016, AAL’s revenues fell 2.0% YoY, and its revenues fell 3.9% YoY in 2015.

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EBITDA

For 3Q17, American Airlines’ (AAL) EBITDA[1. earnings before interest, tax, depreciation, and amortization] is expected to grow 2.0% YoY to $2.2 billion. For the third quarter, this growth should come entirely from its increasing revenues. AAL’s EBITDA margins are expected to decline slightly from 20.0% in 3Q16 to 19.7% in 3Q17. 

For 4Q17, AAL’s growth is expected to increase to 15.7% YoY to $1.6 billion. For 4Q17, AAL’s EBITDA margins are expected to expand to 16.1% from 14.8% in 4Q16 and could be a major contributor to its EBITDA growth.

This trend could lead to fiscal 2017 growth of 2.1% YoY to $17.7 billion with an EBITDA margin of 18.3%, which is slightly lower than its 18.7% margin posted in 2016.

Earnings

For the third quarter of 2017, American Airlines’ (AAL) earnings are expected to fall 14.8% YoY to $1.50 per share due to an 18.4% YoY decline in net profits. For 4Q17, its earnings are expected to fall 4.7% YoY to $0.88 per share due to a 7.9% YoY decline in net profits. 

A portion of the decrease in AAL’s net profit was offset by the declining number of outstanding shares, a result of AAL’s share buyback program.

For fiscal 2017, AAL’s earnings per share (or EPS) are expected to fall 13.4% YoY to $4.95 per share due to a 22% decline in net profits, offset by the declining number of shares.

Investors can gain broad-based exposure to airlines by investing in the PowerShares Dynamic Leisure and Entertainment Portfolio ETF (PEJ), which invests ~5.0% of its holdings in Delta Air Lines (DAL). PEJ also holds 4.9% in United Continental (UAL) and 2.7% in JetBlue (JBLU), but it has no holdings in American Airlines (AAL).

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