American shares drop 5% on weak profit forecast after backfired sales plan, industry oversupply
shares shed more than 5% in premarket trading Thursday after the carrier slashed its profit forecast for the year after a backfired sales strategy and an industry-wide glut of flights that have forced airlines to discount seats.American shares drop 5% on weak profit forecast after backfired sales plan, industry oversupply
American said it expects to earn an adjusted 70 cents to $1.30 per share this year, well below the $2.25 to $3.25 a share it forecast in April and short of the $1.10 to $2.60 a share that Wall Street analysts were expecting, according to LSEG.
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The Fort Worth-Texas based airline also estimated its unit revenue would drop as much as 4.5% for the third quarter as high travel demand failed to make up for an excess of flights.
The carrier has been trying to undo policies of a direct-to-consumer sales strategy it adopted that backfired. It said in an earnings release Thursday that it has “taken swift and aggressive action to reorient its sales and distribution strategy” after complaints from travel agents and customers.
“American has a fleet, network and product built to deliver results, but during the second quarter, we did not perform to our initial expectations due to our prior sales and distribution strategy and an imbalance of domestic supply and demand,” American’s CEO Robert Isom said in a news release.American shares drop 5% on weak profit forecast after backfired sales plan, industry oversupply
Here is how American performed in the second quarter compared with Wall Street estimates compiled by LSEG:
Earnings per share: $1.09 adjusted vs. $1.05 expected
Revenue: $14.33 billion vs. $14.36 billion expected
Southwest’s profit fell 46% during the second quarter to $717 million, or $1.01 per share, even though revenues rose 2% to $14.33 billion.
Adjusting for one-time items, the airline reported earnings of $1.09 per share.
American’s results come after Southwest Airlines
also reported a 46% drop in its quarterly profit and said it is taking “urgent” steps to increase revenue.
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