Should You Buy American Airlines Stock Ahead of Q1 Earnings?

Core Viewpoint - American Airlines is expected to report a significant loss in Q1 2025, with a consensus estimate of a loss of 65 cents per share, which is a 91.2% decline compared to the previous year [1][5]. Financial Performance - The Zacks Consensus Estimate for Q1 2025 revenues is $12.52 billion, reflecting a 0.4% decrease from the previous year [1]. - The company's Earnings ESP is -6.90%, indicating a likelihood of missing the earnings estimate [5]. - American Airlines has a history of earnings surprises, having outperformed estimates in three of the last four quarters with an average beat of 37.1% [3]. Market Conditions - Domestic air travel demand has slowed due to tariff-induced economic uncertainties, impacting consumer and corporate confidence [7]. - Despite the slowdown in domestic travel, international passenger revenues are projected to increase by 3.3% year-over-year [7]. Cost Factors - Labor costs are anticipated to rise by 11.1% compared to Q1 2024, which may negatively affect the bottom line [8]. - High labor costs are a concern for the company, contributing to the expected unimpressive performance in Q1 [19]. Stock Performance - Airline stocks, including American Airlines, have seen significant declines in the January-March period, with American Airlines shares dropping by 39.5% [10]. - American Airlines is trading at a forward sales multiple of 0.11X, which is lower than the industry average of 0.51X, indicating a cheaper valuation compared to peers [13]. Strategic Moves - The company is attempting to regain corporate clients by renegotiating contracts with travel agencies after a previous strategy led to a loss of clients [17]. - The airline's efforts to improve margins through contract renegotiations are ongoing, following a strategy that backfired last year [17]. Investment Outlook - Given the current economic uncertainties and low passenger revenues, particularly in the domestic market, it is advised that investors avoid purchasing American Airlines stock until more stability is observed [19].