American Airlines cuts guidance but EPS beats estimates, stock pops 5%

American Airlines (AAL) lowered its full-year forecast citing rising fuel costs and demand trends, but its adjusted profit for the third quarter came in well above Wall Street expectations.

The stock rebounded more than 4% on Thursday after hitting a three-year low in the prior session.

“During the third quarter, the average price of jet fuel increased sharply. While the rapid increase in fuel prices resulted in lower earnings in the quarter, we continue to stay focused on our priorities,” American Airlines CFO Devon May said during the company’s earnings call on Thursday morning.

American’s adjusted third quarter earnings of $0.38 per share came in above the $0.25 expected by analysts. The airline posted record third quarter revenue of $13.5 billion, driven by growth in international travel.

American now sees full-year adjusted earnings per share of $2.25-$2.50, down from a prior forecast of $3-$3.75. The downbeat profit forecast comes a day after rival United (UAL) gave a similar warning, citing higher fuel costs and the impact of flight cancellations to Tel Aviv amid the Israel-Hamas war.

In September the major airlines warned of higher fuel costs impacting their bottom line. Labor costs also increased as the major airlines have recently finalized pilot contracts.

"They're all going to be subject to the same fuel, they're going to be subject to the same labor costs, and they're going to have to deal with it. But to be blunt, the major airlines ... are in very good shape to get through a lot of turbulence in the next six to eight months," Mike Boyd, president of aviation consulting agency Boyd Group International, told Yahoo Finance this week.

International travel continues to be a strong segment for the industry.

American's CFO said post-Labor Day bookings have been in line with expectations, with "steady improvement in business travel ... strong international demand, and historically high premium revenue both domestically and internationally."

"We expect steady demand during the upcoming peak travel season, however, the strong unit revenue environment from 2022 continues to be a difficult comparison," added May.

Year to date American is down 7%. Peer United Airlines rebounded more than 1% on Thursday after tanking 9% in the prior session. Year to date, UAL shares are roughly flat.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.

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