Shares of American Airlines Group Inc. (AAL) fell to a four-month low in premarket trading on Wednesday after the air carrier revised its third-quarter earnings forecast. The company cited higher fuel prices and expenses related to a new labor agreement as the reasons for the adjustment.
Lowered Earnings per Share Guidance
American Airlines now expects adjusted earnings per share to be around 20 cents to 30 cents, a significant decrease from its previous guidance of about 85 cents to 95 cents. The FactSet EPS consensus stands at 69 cents.
Impact of Labor Agreement
The new collective bargaining agreement with the pilots union led to a retroactive pay expense of approximately $230 million, causing a decline of 23 cents in the adjusted EPS outlook.
Fuel Price Hike
Apart from the labor-related costs, the company attributed the rest of the adjustment to the rise in fuel prices during the quarter. The guidance range for the average fuel price per gallon has been increased from $2.55 to $2.65 to $2.90 to $3.00.
Revised Growth Outlook
On a positive note, American Airlines raised its year-over-year growth outlook for available seat miles to 6% to 7%, up from the previous range of 5% to 7%.
In the past three months, American Airlines’ stock has dropped by 13.5%. In comparison, the U.S. Global Jets ETF (JETS) has declined by 9.0%, while the S&P 500 (SPX) has gained 2.1%.