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United (UAL) Down 12.5% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for United Airlines (UAL - Free Report) . Shares have lost about 12.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is United due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at UAL in Q2
United Airlines reported second-quarter 2023 earnings per share of $5.03, which outpaced the Zacks Consensus Estimate of $3.99 and improved more than 100% year over year.
Operating revenues of $14,178 million beat the Zacks Consensus Estimate of $13,927.1 million. UAL’s revenues increased 17.1% year over year due to upbeat air-travel demand. The year-over-year increase in the top line was driven by a 20.1% rise in passenger revenues (accounting for 91.7% of the top line) to $13,002 million. Nearly 42 million passengers traveled on UAL flights in the second quarter.
Cargo revenues fell 36.9% year over year to $362 million. Revenues from other sources increased 14.8% from the second quarter of 2022 to $814 million.
Other Details of Q2
Below, we present all comparisons (in % terms) with the second quarter of 2022 figures unless otherwise stated.
Consolidated passenger revenue per available seat mile (a key measure of unit revenues) increased 2.2%. Total revenue per available seat mile fell 0.4% to 19.28 cents. The average yield per revenue passenger mile increased 2.6% to 20.46 cents.
Consolidated airline traffic, measured in revenue passenger miles, grew 17%, while capacity, measured in available seat miles, grew 17.5%. Consolidated load factor (percentage of seat occupancy) inched down 0.3 percentage points to 86.4%, higher than our estimate of 81.4%.
The average aircraft fuel price per gallon fell 36.4% to $2.66, lower than our expectation of $2.83. Fuel gallons consumed were up 16.4% from the second quarter of 2022 actuals.
Operating expenses (on a reported basis) increased 12.7% to $12,661 million. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expenses, profit-sharing and special charges, grew 2% to 11.85 cents.
UAL exited the second quarter with cash and cash equivalents of $9,605 million compared with $7,634 million at the end of the prior quarter. Long-term debt at the end of the reported quarter was $26,713 million compared with $27,460 million at the end of the prior quarter.
Outlook
For the third quarter of 2023, United Airlines expects capacity to improve by almost 16% from the year-ago reported figure.
Total revenues are anticipated to grow 10-13% year over year. UAL expects third-quarter earnings per share in the band of $3.85-$4.35. UAL forecasts the average aircraft fuel price per gallon in the range of $2.50-$2.80.
For 2023, United Airlines expects capacity to improve by almost 18% from the year-ago reported figure. Adjusted CASM, excluding fuel, third-party business expenses, profit-sharing and special charges, is expected to register year-over-year growth of 1 (prior view: remain flat). Adjusted capital expenditures are expected to be around $8.5 billion. UAL now expects 2023 EPS in the band of $11.00-$12.00 (prior view: $10-$12).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 13.2% due to these changes.
VGM Scores
At this time, United has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise United has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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United (UAL) Down 12.5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for United Airlines (UAL - Free Report) . Shares have lost about 12.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is United due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at UAL in Q2
United Airlines reported second-quarter 2023 earnings per share of $5.03, which outpaced the Zacks Consensus Estimate of $3.99 and improved more than 100% year over year.
Operating revenues of $14,178 million beat the Zacks Consensus Estimate of $13,927.1 million. UAL’s revenues increased 17.1% year over year due to upbeat air-travel demand. The year-over-year increase in the top line was driven by a 20.1% rise in passenger revenues (accounting for 91.7% of the top line) to $13,002 million. Nearly 42 million passengers traveled on UAL flights in the second quarter.
Cargo revenues fell 36.9% year over year to $362 million. Revenues from other sources increased 14.8% from the second quarter of 2022 to $814 million.
Other Details of Q2
Below, we present all comparisons (in % terms) with the second quarter of 2022 figures unless otherwise stated.
Consolidated passenger revenue per available seat mile (a key measure of unit revenues) increased 2.2%. Total revenue per available seat mile fell 0.4% to 19.28 cents. The average yield per revenue passenger mile increased 2.6% to 20.46 cents.
Consolidated airline traffic, measured in revenue passenger miles, grew 17%, while capacity, measured in available seat miles, grew 17.5%. Consolidated load factor (percentage of seat occupancy) inched down 0.3 percentage points to 86.4%, higher than our estimate of 81.4%.
The average aircraft fuel price per gallon fell 36.4% to $2.66, lower than our expectation of $2.83. Fuel gallons consumed were up 16.4% from the second quarter of 2022 actuals.
Operating expenses (on a reported basis) increased 12.7% to $12,661 million. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expenses, profit-sharing and special charges, grew 2% to 11.85 cents.
UAL exited the second quarter with cash and cash equivalents of $9,605 million compared with $7,634 million at the end of the prior quarter. Long-term debt at the end of the reported quarter was $26,713 million compared with $27,460 million at the end of the prior quarter.
Outlook
For the third quarter of 2023, United Airlines expects capacity to improve by almost 16% from the year-ago reported figure.
Total revenues are anticipated to grow 10-13% year over year. UAL expects third-quarter earnings per share in the band of $3.85-$4.35. UAL forecasts the average aircraft fuel price per gallon in the range of $2.50-$2.80.
For 2023, United Airlines expects capacity to improve by almost 18% from the year-ago reported figure. Adjusted CASM, excluding fuel, third-party business expenses, profit-sharing and special charges, is expected to register year-over-year growth of 1 (prior view: remain flat). Adjusted capital expenditures are expected to be around $8.5 billion. UAL now expects 2023 EPS in the band of $11.00-$12.00 (prior view: $10-$12).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 13.2% due to these changes.
VGM Scores
At this time, United has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise United has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.