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Airline Stocks' Q3 Earnings Due on Oct 25: AAL, ALK & More

This earnings season has started off on a strong note, with better-than-expected results from the majority of the companies. Per the latest Earnings Preview , 154 S&P 500 companies are expected to report quarterly numbers this week.

According to the report, the entire S&P 500 is projected to end the Q3 reporting cycle with bottom-line growth of 19.2% on a year-over-year basis. The same set of companies is expected to witness top-line growth of 7.2%.

In fact, of the 16 Zacks sectors, 10 are anticipated to end the current reporting cycle with double-digit earnings growth. One of them is the widely-diversified Zacks Transportation sector , which includes airline stocks. The top- and bottom line for this sector are anticipated to increase 9.5% and 22.6%, respectively, on a year-over-year basis. These projections compare favorably with the readings in Q2, when revenues increased 8.7% and earnings were up 16.2%.

Despite high fuel costs, key airline players like Delta Air Lines, Inc. DAL and JetBlue Airways Corporation JBLU have already reported better-than-expected earnings per share in the current reporting cycle. Notably, solid demand for air travel, affordable air fares and lower tax rates are the major growth drivers for airlines. In Q3, passenger revenues increased 8.8%, 11.6% and 10.8% at Delta, United Continental Holdings, Inc. UAL and JetBlue, respectively, courtesy of a robust demand for air travel.

Given this backdrop, investors interested in the airline space keenly await Q3 reports from key sector participants like American Airlines Group Inc. AAL , Alaska Air Group, Inc. ALK , Southwest Airlines Co. LUV and Spirit Airlines, Inc. SAVE on Oct 25.

According to our quantitative model, a company needs the right combination of two key ingredients - a positive Earnings ESP and a Zacks Rank #3 (Hold) or better - to increase its odds of an earnings surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

American Airlines is headquartered in Fort Worth, TX. High fuel costs are likely to hurt the company's bottom line in Q3. Average fuel price per gallon is anticipated to lie between $2.28 and $2.33. Hurricane Florence is also expected to weigh on its third-quarter results.

Our proven model too does not show that American Airlines will beat earnings estimates this quarter. This is because it has an Earnings ESP of 0.00% and a Zacks Rank #5 (Strong Sell) (read more: Will High Fuel Costs Mar American Airlines' Q3 Earnings? ).

Note that we caution against stocks with a Zacks Ranks #4 (Sell) or 5 going into an earnings announcement, especially when the company is seeing a negative estimate revision.

American Airlines Group Inc. Price and EPS Surprise

American Airlines Group Inc. Price and EPS Surprise | American Airlines Group Inc. Quote

High costs are likely to mar Alaska Air Group's bottom-line growth. Notably, the carrier expects third-quarter non-fuel unit costs to rise approximately 4.1% year over year. Also, economic fuel cost per gallon is anticipated to increase nearly 29% to $2.32.

Our proven model too does not show that Alaska Air Group is likely to beat earnings estimates this quarter, despite its Zacks Rank #3. This is because the company has an Earnings ESP of 0.00% (read more: Alaska Air Group Q3 Earnings: What's in the Offing? ).

Alaska Air Group, Inc. Price and EPS Surprise

Alaska Air Group, Inc. Price and EPS Surprise | Alaska Air Group, Inc. Quote

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

We expect Southwest Airlines to report better-than-expected earnings per share this quarter despite high fuel costs. Impressive bookings and close-in yield trends are likely to boost passenger revenues, which accounts for bulk of the top line. This low-cost carrier has a Zacks Rank #3 and an Earnings ESP of +1.61% (read more: Can Passenger Revenues Aid Southwest Q3 Earnings? ).

Southwest Airlines Co. Price and EPS Surprise

Southwest Airlines Co. Price and EPS Surprise | Southwest Airlines Co. Quote

We expect high fuel costs to hurt results at Spirit Airlines. Our proven model too does not show that it is likely to beat earnings estimates this quarter, despite a Zacks Rank of 3. This is because the company has an Earnings ESP of 0.00%.

Spirit Airlines, Inc. Price and EPS Surprise

Spirit Airlines, Inc. Price and EPS Surprise | Spirit Airlines, Inc. Quote

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JetBlue Airways Corporation (JBLU): Free Stock Analysis Report

United Continental Holdings, Inc. (UAL): Free Stock Analysis Report

Alaska Air Group, Inc. (ALK): Free Stock Analysis Report

Delta Air Lines, Inc. (DAL): Free Stock Analysis Report

Southwest Airlines Co. (LUV): Free Stock Analysis Report

American Airlines Group Inc. (AAL): Free Stock Analysis Report

Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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