American Airlines (AAL) Exceeds Q4 Sales Estimates but Falls Short on Guidance

Key Highlights:

* Revenue: $13.66 billion (4.6% year-over-year growth, beat analyst estimates by 1.8%)
* Non-GAAP EPS: $0.86 (30.1% above analyst consensus)
* Adjusted EPS guidance for 2025: $2.20 (missing analyst estimates by 10.1%)
* Operating Margin: 8.3% (up from 5% in Q4 2023)
* Revenue Passenger Miles: 60.68 billion (1.0% beat vs expectations)

Overview:

American Airlines, one of the "Big Four" airlines in the US, reported stronger-than-expected sales for Q4 2024. However, its full-year EPS guidance fell below analysts' estimates, contributing to a 7.2% drop in share price post-earnings.

Sales Growth:

American Airlines' sales have grown at a 3.4% compounded annual rate over the past five years. While this lags behind the consumer discretionary sector, the company's annualized revenue growth of 5.2% over the past two years reflects improvement.

Monetization and Revenue Passenger Miles:

Despite revenue growth, American Airlines' revenue passenger miles growth has outpaced sales growth over the last two years. This suggests a decline in monetization.

Outlook:

Analysts anticipate revenue growth of 4.7% for the next 12 months, aligning with the company's recent performance.

Cash Performance:

American Airlines' free cash flow margin has averaged 3.1% over the past two years, indicative of limited capacity for shareholder capital returns.

Takeaway:

While American Airlines exceeded revenue expectations in Q4, its EPS guidance and EPS estimates for the coming quarter have negatively impacted the stock. The latest earnings report presents a mixed picture, and further analysis is required to determine the stock's buying potential.