Charting The The Turbulent American Airlines Q4 Earnings Trade With PreMarket Prep

Zinger Key Points
  • Thursday was a more than volatile day for American Airlines stock.
  • The airline preannounced fourth-quarter results to the upside earlier this month.

On some occasions, a company will preannounce that is going to have better than expected earnings. When that happens, it is often more difficult to predict the price action in the issue following the announcement for a few different reasons. The primary one: investors already factored in the better numbers.

That is the scenario American Airlines Group Inc AAL investors were confronting in Thursday’s session, making it the PreMarket Prep Stock of the Day.

American's Preannouncement Push: Before the opening Jan. 12, the airline announced that it would have better expected results in the fourth quarter.

American Airlines said it expected to report fourth-quarter adjusted EPS of between $1.12-$1.17 against a 60-cent-per-share estimate.

American forecast fourth-quarter CASM-ex to be up 10% compared to its previous guidance of up between 8% and 10%.

That instigated a $1.49 or nearly 1% gain, with the stock rallying from $15.34 to $16.83.

Keep in mind that the issue ended 2022 at $12.74 and had been riding a six-day winning streak ahead of the announcement. That closing price put the issue in the green for the year by $4.09 or 32%. 

American's Major Liftoff And Reversal: Following two quiet sessions that saw the issue move modestly higher, it had sympathy move with United Airlines Holdings Inc. UAL in the Jan. 18 trading session following its peer's fourth-quarter earnings print. 

That reinvigorated the bulls and caused a spike off the opening bell. Similar to UAL, American peaked early in the session and then sharply reversed course. As a result, the issue went from an early gain of over 50 cents to a loss on the day of 44 cents, or 2.6%, falling from $17.08 to $16.64.

After quiet, rangebound trading ($15.90-$16.54) over the next five days, American ended Wednesday’s session at $16.26.

American's Q4 Report: Before the opening Thursday, the airline posted fourth-quarter EPS of $1.17, which beat a $1.14 revised estimate. Sales of $13.2 billion were inline. That revenue was higher than any fourth quarter in company history.

Finally, American said it expects by the end of 2023 to have reduced total debt by $10 billion to $11 billion from peak levels in mid-2021.

PreMarket Prep's Take: When the issue was being covered on the show Thursday, it was trading modestly high at the $16.50 area. Co-host Dennis Dick noted the company had preannounced and expectations were already factored into the price action.

The author of this article highlighted the rangebound action over the last few sessions and noted the importance of the stock holding the the top of the range off the opening bell. On any decline, the issue was poised to find buyers at the lower end of the five-day range.

AAL Price Action: Thursday was a more than volatile day for American Airlines stock. Following a higher open, American immediately peaked at $16.74 and reversed course. The ensuing decline found support just under Wednesday’s low ($15.90) at $15.73 before the stock embarked on a rally.

American Airlines ultimately gained 2.15% Thursday, closing at $16.61. 

The discussion on the issue from Thursday’s show can be found here:

Photo via Shutterstock. 

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