Should You Buy American Airlines Stock Ahead of Q1 Earnings?

American Airlines AAL is set to release its first-quarter 2025 results on April 24, before the market opens.The Zacks Consensus Estimate for first-quarter 2025 loss is currently pegged at 65 cents, wider than the loss of 23 cents 60 days ago. Additionally, the consensus mark implies a 91.2% southward movement from the year-ago actual. The Zacks Consensus Estimate for first-quarter 2025 revenues is pegged at $12.52 billion, indicating a 0.4% downside from the year-ago actual.Image Source: Zacks Investment ResearchAAL has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark in the remaining quarter, the average beat being 37.1%.American Airlines Price and EPS Surprise American Airlines Group Inc. price-eps-surprise | American Airlines Group Inc. QuoteQ1 Earnings Whispers for AALOur proven model does not predict a beat on the bottom line front for AAL this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat, which is not the case here.The company's Earnings ESP is -6.90%. This is because the Most Accurate Estimate is currently pegged at a loss of 69 cents per share, whereas the Zacks Consensus Estimate hints at a loss of 65 cents. (See the Zacks Earnings Calendar to stay ahead of market-making news.)AAL currently carries a Zacks Rank #5 (Strong Sell).You can see the complete list of today’s Zacks #1 Rank stocks here.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Given this backdrop, let us examine the factors that might have influenced United Airlines’ performance in the to-be-reported quarter.We expect tariff-induced economic uncertainties and the resultant reduction in consumer and corporate confidence to have caused a slowdown in domestic air travel demand. However, with the demand for long-haul travel remaining buoyant, international passenger revenues are likely to have been impressive. International passenger revenues are likely to increase 3.3% year over year, per our model.Labor costs are also likely to have been high, hurting bottom-line performance in the March quarter. We expect salaries and related costs to increase 11.1% in the to-be-reported quarter from the first quarter of 2024 actuals.AAL Price Performance & Stock ValuationDue to the slowdown in domestic air travel demand, airline stocks have performed dismally in the January-March period. American Airlines and other key players in the Zacks Transportation - Airline industry, such as Delta Air Lines DAL and United Airlines UAL, declined in double digits in the three-month period. Shares of American Airlines, Delta Air Lines and United Airlines plunged 39.5%, 28% and 28.9%, respectively.Q1 Price ComparisonImage Source: Zacks Investment ResearchFrom a valuation perspective, American Airlines is trading cheaper than the industry. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.11X, lower than the industry average of 0.51X. The company has a Value Score of B.Fellow airline operators, Delta Air Lines and United Airlines, are more expensive, even though lower than the industrial reading. While United Airlines is trading at a forward sales multiple of 0.36X, Delta Air Lines trades at 0.42X.AAL’s P/S F12M Vs. Industry, DAL & UAL Image Source: Zacks Investment ResearchInvestment Thesis for AALEven though air travel demand has improved from the pandemic low, the recent slowdown in the same, particularly on the domestic front, is a concern. The tariff-induced economic uncertainty is unlikely to fade away soon and is likely to weigh further on passenger revenues. High labor costs are a concern and are likely to have hurt the bottom line. However, American Airlines’ move to renegotiatesales contracts is helping the company win back corporate clients. Last year, the airline had cut perks and discounts related to its contracts with corporate travel agencies and clients in a bid to improve margins. But the strategy backfired, with an exodus of corporate clients, ultimately leading to Vasu Raja, who spearheaded the disastrous strategy, stepping down. In a bid to win back corporate clients, AAL renegotiated contracts with travel agencies. AAL is Best Avoided NowDespite low fuel costs, AAL is likely to have recorded an unimpressive first-quarter performance due to low passenger revenues, mainly on the domestic front.Given this backdrop, we can safely conclude that investors should refrain from rushing to buy AAL stock ahead of its earnings release on April 24. Until there is more clarity, investors should avoid American Airlines stock and wait for a more stable setup.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Delta Air Lines, Inc. (DAL): Free Stock Analysis Report United Airlines Holdings Inc (UAL): Free Stock Analysis Report American Airlines Group Inc. (AAL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks