Airline investors awaiting second-quarter earnings reports, which start Thursday with Delta Air Lines Inc. (DAL) , had generally high expectations and that was before American Airlines Group Inc. (AAL) reported strong second-quarter unit revenue growth on Wednesday.
American said it expects second-quarter total revenue per available seat mile to rise between 5% and 6%, ahead of guidance of between 3.5% and 5.5%, as a result of higher passenger yields "with particular strength in the domestic, Central/South American and Caribbean regions."
American also expects second-quarter pretax margin of between 13% and 14%, better than previous guidance of between 12% and 14%.
Following the American report, several analysts raised price targets for the carrier.
Deutsche Bank analyst Mike Linenberg raised his second-quarter earnings estimate for American to $1.85 a share, compared with consensus of $1.72, and raised his price target to $56. "We see improving U.S. economic growth prospects due to the expected adoption of stimulative fiscal policies," he wrote.
Cowen & Co. analyst Helane Becker raised her target to $55, while Buckingham Research analyst Dan McKenzie raised his to $68.
Shares of American, Delta, United Continental Holdings Inc. (UAL) and Southwest Airlines Inc. are trading near all-time highs, and oil prices are falling.
American shares rose 3%, Delta gained 1.6% and United rose 3.5%,
As for Delta, Becker said she believes the carrier will lead peers in current quarter unit revenue performance. As a result, "We anticipate a rotation from United and American into Delta" shares, Becker wrote in a report issued Monday.
Becker expects Delta will guide to a current quarter unit revenue gain between 3% to 5%, which includes a 2% gain due to the year-ago impact of an August 2016 computer outage that resulted in about 2,000 cancelled flights and $150 million in costs.
Delta "should be viewed as a 'must own' into 3Q guidance as the company's 3Q17 unit revenue should outperform the industry," she wrote.
Expectations for United seem a bit lower.
After the market closed Tuesday, United said it expects second-quarter PRASM to gain 2%, the midpoint of its original guidance between 1% and 3%.