Over the past month, American Airlines’ stock has dropped by 4.21%. This is worse than the Transportation sector, which rose by 1.49%, and the S&P 500, which climbed 0.6%. The airline will release its next earnings report on January 27, 2026. Analysts expect earnings per share (EPS) to be $0.38, a sharp decline of 55.81% from last year. Revenue is projected to reach $14.07 billion, marking a 3.02% increase from the previous year.

Zacks Consensus Estimates

The Zacks Consensus Estimates for the fiscal year predict EPS of $0.56 and revenue of $54.7 billion. This reflects a decrease of 71.43% in EPS and no change in revenue compared to last year. Analysts often adjust their estimates based on short-term trends. The Zacks Rank model scores stocks on these changes. A #1 rank has averaged a 25% return since 1988. Currently, American Airlines has a Zacks Rank of #3 (Hold) and a Forward P/E ratio of 7.46, which is lower than the industry average. The Transportation – Airline industry ranks 155 out of over 250 industries, placing it in the bottom 37%. The stock is struggling, having fallen over 4% in the last month while the market gained. Its valuation seems low with a Forward P/E of 7.46, significantly below the industry average. This creates a crucial moment ahead of the earnings report tomorrow, January 27th. Earnings per share are expected to drop by more than 55% compared to last year, raising concerns. This decline is mainly due to rising labor costs from new pilot contracts finalized in mid-2025, which likely contributed to the stock’s recent struggles.

Trading Strategies

On a positive note, revenue is expected to increase slightly, indicating strong demand. Recent TSA data shows that passenger traffic during the 2025 holiday season was nearly 5% higher than pre-pandemic levels, suggesting that people are still flying. The main question for traders is whether this demand can balance out rising costs and recent decreases in jet fuel prices. Given these mixed signals, a clear trading opportunity lies in the expected volatility around the earnings announcement. Options pricing indicates a significant price move is likely. Using a straddle strategy could be beneficial, as it allows for profits if the stock rises or falls sharply. The key is that the stock needs to move more than the premium paid for the options. For those with a specific outlook, buying puts may align with the current downward trend and weak industry ranking. However, given the low expectations, any positive earnings surprise could lead to a strong rally, making call options an attractive choice for those betting against the trend. We saw a similar rally after a disappointing Q3 2025 report when beating low expectations became crucial. Create your live VT Markets account and start trading now.

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