Airline Stocks: United and American Earnings on Deck

Will United and American Airlines replicate Delta's earnings surprise?

• Delta Airlines reported earnings today and beat both EPS and revenue expectations by 3.16% and 2.34%, respectively.
• United Airlines is set to report earnings after the market closes at 3:05 p.m. CDT on Oct. 17, with an expected $3.41 earnings-per-share (EPS) on $14.41 billion in revenue.
• American Airlines is scheduled to report earnings before the market opens on October 19, at 6:00 a.m. CDT, with an expected $0.26 EPS on revenue of $13.54 billion.

Airline Stock earnings season is underway

Delta Airlines (DAL) just reported earnings and had a strong report, citing strength in international travel, even through the spike in fuel costs we saw for a brief moment. It said it expects similar demand through the rest of the year, as consumers continue to travel through the upcoming holiday season.

United and American Airlines report earnings next week. Let's take a deeper look into each stock price to see what the market is expecting from this quarterly earnings announcement.

United Airlines earnings preview

United Airlines (UAL) will report quarterly earnings after the market closes on Tuesday, Oct. 17, at 3:05p.m., and it will look to continue its strong earnings reports from the past few quarters. The popular airline has beaten EPS expectations four quarters in a row by at least 14.17%. It has alos exceeded revenue expectations three of the last four quarters.

United has had a volatile 2023 so far, opening at $38.22 and spiking to over $50 per share just two weeks later. The stock reached a high of $58.23 on July 21, 2023, and currently sits just above the 2023 open at $40.19 per share.

UAL stock is expected to report a lower EPS number and a higher revenue number, compared to last quarter.

The stock's expected move through next week based on current implied volatility is +-$2.55, just over 5% of the current stock price.

American Airlines earnings preview

American Airlines (AAL) will report quarterly earnings before the market opens on Thursday, Oct. 19, at 6:00 a.m. CDT. Like United, AAL stock has beaten EPS expectations four quarters in a row by at least 8.62%. It has missed revenue expectations two of four times in the same period.

Note that EPS expectations are way down, dropping this quarter from $1.59 to $0.26. It will be interesting to see how the airline plans to bring EPS up in the future.

AAL stock has had a wild 2023, much like the other airline stocks, opening the year at $12.91 per share and spiking to $17.64 two weeks later. The stock has tumbled since then, and currently sits near the annual low at $12.25.

The stock's expected move through next week based on current implied volatility is +-$0.74, just over 6% of the current stock price.

Bullish on airline stocks for earnings

After Delta reported a 60% jump in profits, it seems like a stronger narrative to be bullish than bearish on airline stocks. Most of these stocks are near the lows of the year as well, which makes for a buy-low situation. I like betting on airline stocks to the upside before the holiday season, as we usually see strong domestic demand at that time of year. If we see strong international demand from American and United, we may see a bullish move after earnings are released.

Bearish on airline stocks for earnings

It's hard for me to be bearish on airlines leading into the holiday, especially after seeing fuel costs come down from their recent highs. Strong demand could play a big role in revenue for both of these airline stocks, but there's always room for an earnings surprise to the downside, considering the volatile nature of earnings reports.

Tune in to Options Trading Concepts Live next week each day for a full breakdown of options trades around these airlines stocks at 11 a.m. CDT.

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb  

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