The roller-coaster ride in Air Canada (TSX:AC) stock doesn’t seem to be ending soon. After losing 53% of its value in 2020, AC stock couldn’t recover in 2021, despite starting the year on a solid note. Its share price fell by 7.2% in 2021. Similarly, Air Canada stock started 2022 on a strong note by jumping 15% in the first quarter, but it tanked again by 34% in the second quarter. Amid high volatility, it currently trades with 12% year-to-date losses at $18.60 per share — down nearly 62% from its pre-pandemic year 2019’s closing level.
Before discussing whether AC stock is worth buying now, let’s take a closer look at some key recent developments at Air Canada, which could be responsible for its unpredictable recent stock price movement.
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Air Canada stock: Key recent developments
The largest Canadian passenger airline company announced its third-quarter results less than a month ago on October 28. In its earnings report, Air Canada’s management highlighted the ongoing restoration of its extensive network and improved operating performance, which helped it report positive adjusted quarter earnings for the first time after consistently posting losses in the previous 10 quarters in a row.
In the September quarter, Air Canada’s total revenue jumped by 153% from a year ago to $5.3 billion with the help of a solid 94% year-over-year increase in its passenger revenue. With this, the airline company posted adjusted earnings of $1.23 per share in September 2022 quarter against an adjusted net loss of $1.70 per share in the corresponding quarter of the previous year. Its third-quarter earnings were also massively higher than Bay Street analysts’ expectation of $0.43 per share.
However, not everything was positive about Air Canada’s latest quarterly results, as you can guess after looking at its recent stock price movement. Since the release of its quarterly results, AC stock has dived by move than 6%. Due to the sharp increase in oil prices in recent quarters, the company’s aircraft fuel costs jumped to over $1.6 billion in the last quarter compared to just $472 million a year ago. While the airline company has also hugely increased its available seat miles capacity in the last few quarters, higher fuel costs are still trimming its bottom line.
Moreover, rising wages, salaries, and benefits, along with the depreciating Canadian dollar in the last couple of quarters, have forced Air Canada to increase its adjusted cost per available seat mile guidance for the full year 2022.
Is Air Canada stock worth buying now?
Since the start of the COVID-19 pandemic, Air Canada has focused more on improving its cargo operations, which are continuing to contribute positively to its earnings. However, these contributions might not be enough to help the company to remain profitable in the coming quarters.
In addition, continued high inflationary pressures may make the financial recovery even more difficult for airline companies across the globe, including Air Canada. Given these challenges, I’d prefer to look for other opportunities on the Toronto Stock Exchange right now, as Air Canada stock’s bumpy ride might continue in the near term. That said, if you have a good risk appetite and are looking for a stock to hold for the next decade or more, you can consider adding Air Canada to your portfolio right now.
