During an earnings season, it's always important to pay attention to the reports and price action of the major companies that are the first to announce in a sector. The reason is that it sets a high or low bar for the others and could be a good indication of how the latter ones will do.
That's certainly the case with American Airlines Group Inc. (NASDAQ:AAL), which is the PreMarket Prep Stock Of The Day.
Leading Indicator: Last week Delta Airlines Inc. (NYSE:DAL) kicked off earnings season with a good report. The company reported quarterly losses of $1.23 per share, which beat the analyst consensus estimate by 14 cents. The fact that it came on lower operating income, Q1 adjusted operating revenue was $8.2 billion vs. $8.76 billion estimates did not seem to matter to the Street.
That instigated a major rally not only in the shares of Delta but for the entire airline sector.
In that session, Delta rallied from $38.62 to $41.02. That same day, American Airlines rallied from $17.13 to $18.86 and ended Wednesday’s session at $19.48.
Q1 Beat: Before today's open, American Airlines reported quarterly losses of $2.32 per share, which beat the analyst consensus estimate by 8 cents. Unlike Delta, the company reported quarterly sales of $8.9 billion, which beat the analyst consensus estimate of $8.83 billion.
In addition, the company announced much higher than previously estimated Q2 sales guidance.
PreMarket Prep Take: When the issue was being covered on the show, it was trading at the $21.50 area, higher by $2, and already established its premarket high of $21.90. Co-host Dennis Dick was impressed with the rally and participated in some short-term trades to the long side, but was not willing to go long at these elevated levels now: “Let’s see how it trades after the open.”
The author of this article analyzed the issue from a longer-term perspective and emphasized the importance of the $22 handle, which was just above the premarket high. For the robust rally to continue, the issue with multiple monthly highs from last fall in the $22.08-$22.35 area.
Price Action: After a much higher open ($21.26 vs. $19.48), it rallied another $0.17 to $21.42 and reversed course. The ensuing decline found support just above the top of Wednesday’s range ($20.07); shares closed at $20.22, a 3.8% gain.
The discussion on the issue from Thursday’s show can be found here:
