What happened
American Airlines Group (AAL 2.12%) was the opposite of a high-flying stock on Friday. At the close of trading, the big carrier's share price was down by 7.1%. Investors were clearly concerned about updated guidance the company issued earlier in the day.
So what
For its current (second) quarter, American upgraded its guidance for several of its key financial metrics.
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The airline now expects total revenue to rise by 11% to 13% compared to the second quarter of 2019 (i.e., the last second quarter before the start of the pandemic). Previously, it was guiding for only 6% to 8%.
The company also upped its forecast for total revenue per available seat mile -- an important financial yardstick for its business -- to 20% to 22% growth over the 2019 quarter; formerly, this estimate was 14% to 16%.
So far, so good. But one piece of guidance went in the opposite direction, and that's the one that really gave investors pause. American now believes its average fuel price will come in at $3.92 to $3.97 per gallon, higher than its preceding forecast of $3.59 to $3.64.
Now what
The bump in the fuel cost guidance isn't particularly surprising given the general increase in oil prices worldwide. Still, it's unpleasant for a shareholder to see notably higher figures in that line item, and investors were punishing American for that.
They might consider giving the company something of a break, however.
Although the airline didn't proffer any bottom-line guidance, it did write in the update that the anticipated revenue growth "is expected to more than offset these increased costs, resulting in an expected increase in pre-tax margin, excluding net special items, versus prior guidance." Said margin is now expected to be 4% to 6%, against the previous estimate of 3% to 5%.
