AMR Corporation (NYSE: AMR) – Q4 FY 2010 Earnings Preview
Monday, January 10, 2011 3:26 PM

Parent company of American Airlines, AMR Corporation (NYSE: AMR) is expected to report its Q4 FY 2010 earnings on January 17, 2011. In the last four quarters ending September 30, 2010, AMR's reported earnings missed analysts' consensus estimates on three occasions by margins in the range of 2.50 percent to 200 percent. In the quarter ending September 30, 2010, AMR's earnings exceeded analysts' consensus estimate by 21.90 percent.

AMR Corporation (AMR), incorporated in October 1982, operates in the airline industry. The Company's principal subsidiary is American Airlines, Inc. (American). As of December 31, 2009, American provided scheduled jet service to approximately 160 destinations throughout North America, the Caribbean, Latin America, Europe and Asia. American Airlines is the second largest airline in the world based on available seat miles and revenue passenger miles. American Airlines, American Eagle and the AmericanConnection airlines serve 250 cities in 40 countries with, on average, more than 3,400 daily flights.

The company generates its revenue by booking passengers on its flights throughout the world and only turns a profit by keeping its cost per available seat mile (CASM) below its revenue per available seat mile (RASM). The highly competitive nature of the airline industry forces AMR to keep its prices low but highly volatile oil prices directly impact costs.

In the third quarter FY 2010, AMR reported a net profit of $143 million for the third quarter of 2010, or $0.39 per diluted share compared to a net loss of $359 million, or $1.26 per share for the third quarter FY 2009. The company reported consolidated revenues of $5.8 billion, an increase of 14 percent year-over-year.

On October 1, 2010, American Airlines, British Airways, and Iberia launched their Joint Business between North America and Europe. The American, British Airways and Iberia trans-Atlantic business, initially representing approximately $7 billion in combined revenue between the carriers, will offer seamless service to 433 destinations in 105 countries, with 5,178 daily departures worldwide.

For fourth quarter, analysts' EPS estimates range from the low of -$0.55 to -$0.14 per share, compared to consensus estimate of -$0.33 per share or -$1.25 in the year ago quarter. For this quarter, analysts' revenue estimates range from a low of $5.42 billion to a high of $5.60 billion, compared to a consensus estimate of $5.55 billion or $5.06 billion in the same quarter a year ago. For the quarter ending December 31, 2010, the consensus EPS forecast has improved from a negative -$0.40 per share 60 days ago to negative -$0.33 per share currently.

AMR has not paid any cash dividends on common stock and none were declared for any period during 2009 or 2008, and the Company has no intention of paying dividends in the foreseeable future.

AMR's American Airlines unit said it has seen a year-over-year increase in its overall ticket sales since December 21, when it removed its schedules and airfares for American Airlines and American Eagle flights from ORBITZ'S site and websites powered by, and since December 23, when Expedia's began discriminating against American's flights and schedules by listing them lower in the search display than those of other airlines. In the last 52 weeks, the stock has been trading in the range of $5.86 and $10.50. The stock closed with gains of 0.47 points or 5.80 percent to settle at $8.57 on January 5, 2011. I forecast FY 2011 EPS at $0.30 per share and based on this estimate, I set a one year target price of $10.



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