American Airlines’s (NASDAQ:AAL) Q3 Earnings Results: Revenue In Line With Expectations
Global airline American Airlines (NASDAQ:AAL) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 1.2% year on year to $13.65 billion. Its GAAP loss of $0.23 per share was 275% below analysts’ consensus estimates.
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American Airlines (AAL) Q3 CY2024 Highlights:
- Revenue: $13.65 billion vs analyst estimates of $13.57 billion (in line)
- EPS: -$0.23 vs analyst estimates of $0.13 (-$0.36 miss)
- Full year EPS guidance raised to $1.48 at the midpoint (beat)
- Gross Margin (GAAP): 24.5%, in line with the same quarter last year
- Operating Margin: 0.7%, up from -1.7% in the same quarter last year
- Revenue Passenger Miles: 65.5 billion, up 3.94 billion year on year
- Market Capitalization: $8.43 billion
“The American Airlines team continues to focus on running a reliable operation and managing costs across the airline,” said American’s CEO Robert Isom.
Company Overview
One of the ‘Big Four’ airlines in the US, American Airlines (NASDAQ:AAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.
Travel and Vacation Providers
Airlines, hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales Growth
Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Over the last five years, American Airlines grew its sales at a sluggish 3.4% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or emerging trend. American Airlines’s annualized revenue growth of 8.9% over the last two years is above its five-year trend, but we were still disappointed by the results.
American Airlines also discloses its number of revenue passenger miles, which reached 65.5 billion in the latest quarter. Over the last two years, American Airlines’s revenue passenger miles averaged 8.9% year-on-year growth. Because this number aligns with its revenue growth during the same period, we can see the company’s monetization was fairly consistent. 
This quarter, American Airlines grew its revenue by 1.2% year on year, and its $13.65 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 3.8% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates the market believes its products and services will face some demand challenges.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
American Airlines has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.4%, lousy for a consumer discretionary business.
The company’s cash burn increased from $451 million of lost cash in the same quarter last year . These numbers deviate from its longer-term margin, raising some eyebrows.
Key Takeaways from American Airlines’s Q3 Results
It encouraging to see American Airlines narrowly top analysts’ revenue passenger miles expectations this quarter. We also liked that full year EPS guidance was raised. On the other hand, its EPS in the quarter missed. Overall, this quarter was mixed. The stock traded down 1.7% to $12.63 immediately following the results.
The latest quarter from American Airlines’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price.What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
