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Is American Airlines a Good Bet Before Its Q3 Earnings?

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American Airlines is scheduled to release its third-quarter results on Oct. 22 at 7:00 a.m. ET. Here's what investors can look forward to in American Airlines' earnings call, analysts’ forecasts, and American Airlines' stock performance.

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When is American Airlines' earnings date?

American Airlines is scheduled to report its third-quarter earnings on Oct. 22 before the market opens. The earnings release will be available on the company’s website at around 7:00 a.m. ET. Delta Air Lines reported wider-than-expected losses and kicked off airlines' earnings season. The company's revenues of $3.06 billion were slightly below analysts’ expectations of $3.1 billion. 

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American Airlines’ other major peer, United Airlines has also released its third-quarter earnings. United Airlines' adjusted EPS loss of $8.16 also trailed analysts’ expectations of a loss of $7.53. While airlines' losses were expected, the results had a silver lining. Delta Air Lines and United Airlines both acknowledged that the cash burn rate is declining and the demand is recovering somewhat from the depths of the COVID-19 crisis. 

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Investors will be looking forward to American Airlines’ results to see how its cash burn rate has fared during the quarter and how management expects it to trend it in the fourth quarter. Delta Air Lines reduced its average daily cash burn rate from $43 million in the second quarter to $24 million and expects it to reduce to $10 million by December. Similarly, United Airlines reduced its average daily cash burn rate to $25 million in the third quarter from $40 million in the second quarter.

Investors should also watch to see if American Airlines’ management comments on the pace of demand recovery. American Airlines restored capacity faster than its peers. It will be interesting to see whether or not the company was able to utilize the capacity. 

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American Airlines stock is slightly lower premarket

American Airlines stock has lost 53 percent year-to-date due to less activity in the travel and tourism sector amid the coronavirus pandemic. Its 52-week range is $8.25–$31.67. American Airlines' current stock price is trading 55 percent above the 52-week low and 60 percent below the 52-week high. On Oct. 20, the stock price ended 1.9 percent higher at $12.8. In the pre-market trading on Wednesday, Oct. 21 at 5:47 a.m. ET, the company’s stock price was trading 0.47 percent lower at $12.74. 

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American Airlines put dividends on hold

Like many other airlines, American Airlines' dividends are on hold. The government helped airlines by providing loans and loan guarantees through the CARES Act. However, in turn, the airlines are restricted from buying back stock or paying dividends. In April, American Airlines took $11 billion in assistance from the CARES Act and suspended dividends. Southwest Airlines, Delta Air Lines, and Boeing have also suspended dividends.

How's American Airlines' outlook?

Currently, 18 analysts cover American Airlines. Among the analysts, nine recommend a buy, seven recommend a hold, and two recommend a sell. The consensus target price of $11.25 implies a potential downside of 12 percent compared to the current market price. While some analysts think that the sector is close to a trough, others are concerned that a second wave of the coronavirus could derail the industry’s prospects again.

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Analysts have a consensus EPS estimate of -$5.88 for American Airlines for the third quarter compared to $1.42 in the third quarter of 2019. For the full year 2020, analysts expect an EPS loss of -$19.59. The revenue estimate for the third quarter is $2.76 billion and $16.77 billion for 2020. The expected revenues imply a decline of 76.8 percent and 63.4 percent for the third quarter and 2020, respectively.

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A second coronavirus wave is a real concern for the travel and tourism sector. Airlines rely on international and business travel for most of their earnings. While airlines' cash burn might be declining, it will be quite a while before travel demand recovers for airlines to even break-even. Betting on airlines, including American Airlines, would be highly speculative right now. 

American Airlines' investor relations

American Airlines will release its third-quarter results on its investor relations site. The live webcast of the conference call will be available on Oct. 22 at 8:30 a.m. ET. An online replay will be available on the same site through November 2022. 

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