Expect an Earnings Beat From These 3 Airline Companies in Q1

Delta Air Lines DAL kicked off the first-quarter 2022 earnings season for the airline industry on Apr 13, 2022. This Atlanta-based carrier reported a loss with Omicron disrupting travel plans in the early part of the March quarter.

Nevertheless, with the threat of the Omicron variant subsiding, air-travel demand was exceptionally strong in March this year. Upbeat demand led to DAL earning a profit in the month with the adjusted operating margin reaching almost 10%. Also, driven by buoyant demand, Delta issued a bright outlook for the second quarter of 2022.

We expect the air-travel demand (mainly for leisure) uptick to have bolstered passenger revenues for the airline companies yet to report their financial numbers for the March quarter. However, high fuel costs are likely to have hurt their bottom-line performances. Consequently, oil price escalated 33% in first-quarter 2022, induced by the Russia-Ukraine war.

With the presence of a universe of industry participants, the task of finding the perfect airline stocks with a potential to outperform on the bottom line front can be daunting. But our proprietary methodology makes this job a cakewalk.

The Zacks Stock Screener helped us identify three airline stocks namely, American Airlines AAL, Southwest Airlines LUV and Gol Linhas Aéreas Inteligentes S.A. GOL, all poised to outshine the Zacks Consensus Estimate this earnings season. These stocks have the ideal combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), 3 (Hold) — to surpass expectations. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP is part of our quantitative model to determine the stocks with maximum chances of beating estimates in their impending earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our research shows that the odds of a positive earnings surprise are as high as 70% for the stocks with this apt combination of elements.

Potential Q1 Outperformers

American Airlinesis based in Fort Worth, TX. AAL has an Earnings ESP of +1.54% and a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recently, American Airlines’ management gave an improved total revenue guidance for the first quarter as air-travel demand continues to rebound. Total revenues are likely to decline approximately 16% in first-quarter 2022 from the comparable period’s level in 2019. This is better than AAL’s previous view of an approximate decrease of 17%. However, due to the Russia-Ukraine war, fuel prices are soaring. AAL now estimates fuel cost per gallon to be $2.80-$2.85 in the first quarter compared with $2.73-$2.78 anticipated previously. AAL is slated to report first-quarter results on Apr 21.

American Airlines Group Inc. Price and EPS Surprise

American Airlines Group Inc. price-eps-surprise | American Airlines Group Inc. Quote

Southwest Airlines is based in Dallas. LUV has an Earnings ESP of +24.66% and a Zacks Rank of 3, currently. LUV is slated to report first-quarter results on Apr 28.

Last month, Southwest Airlines’ management gave an improved total revenue guidance for the first quarter as air-travel demand continues to rebound. LUV now expects first-quarter operating revenues to be 8-10% below the first-quarter 2019 levels. The same is better than the prior anticipation of a 10-15% fall. Capacity is expected to be down 9-10% from the first-quarter 2019 actuals. The same indicates a marginal deteriorationfrom the earlier expectation of a 9% decline. Non-fuel unit costs are now expected to increase in the 20-24% range from the first quarter 2019 actuals (previous guidance called for a rise in the band of 17-21%). On a positive note, owing to LUV’s multi-year fuel hedging program, it is insured against spikes in jet fuel prices like the current scenario.

Southwest Airlines Co. Price and EPS Surprise

Southwest Airlines Co. price-eps-surprise | Southwest Airlines Co. Quote

Gol Linhas is a Brazilian carrier. GOL has an Earnings ESP of +210.96% and is Zacks #3 Ranked, currently. GOL is slated to report first-quarter results on Apr 28.

With air-travel demand picking up in Latin America, Gol Linhas expects total demand or air traffic (measured in revenue passenger kilometers) to be up 46% year over year in the first quarter of 2022. To meet increasing demand, GOL is boosting capacity. GOL expects total capacity (measured in available seat kilometers) for the March quarter to be up 44%. Seats are likely to increase 49%. Owing to the uptick in total demand, GOL expects first-quarter passenger unit revenues to increase roughly 45% year over year. EBITDA margin is likely to increase approximately 11%.

Gol Linhas Aereas Inteligentes S.A. Price and EPS Surprise

Gol Linhas Aereas Inteligentes S.A. price-eps-surprise | Gol Linhas Aereas Inteligentes S.A. Quote

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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