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United Continental (UAL) Beats on Q1 Earnings & Revenues
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United Continental Holdings (UAL - Free Report) , which has been vehemently criticized for the passenger fiasco on flight 3411 on Apr 9, finally witnessed some good tidings with better-than-expected earnings and revenues in the first quarter of 2017.
The Chicago-based carrier’s first-quarter 2017 earnings (on an adjusted basis) of 41 cents per share beat the Zacks Consensus Estimate by 4 cents. The bottom line, however, plunged 66.7% year over year due to higher costs.
Operating revenues of $8,420 million in the first quarter were marginally ahead of the Zacks Consensus Estimate of $8,362.5 million. Revenues increased 2.7% on a year-over-year basis.
In fact, United Continental is the second major carrier after Delta Air Lines (DAL - Free Report) to report better-than-expected earnings in the ongoing earnings season.
Operating Results
Consolidated passenger revenue per available seat mile (PRASM or unit revenues) was flat at 12 cents on a year-over- year basis. Yield on a consolidated basis increased 0.4% from the first quarter of 2016, while passenger revenues increased 2.6% to $7,174 million. Cargo and other revenues increased 13.4% and 1.5%, respectively. During the reported quarter, airline traffic measured in revenue passenger miles, improved 2.2% year over year on a consolidated basis. Also, capacity (or available seat miles) grew 2.6%, which led to a 30 basis point decline in load factor (percentage of seats filled with passengers) to 79.6% because capacity expansion outweighed traffic growth.
Moreover, average fuel price (on a consolidated basis) per gallon, excluding hedge losses, increased 41.3% year over year to $1.71. Total operating expenses, excluding special items, grew 10% year over year to $8.1 billion. Consolidated unit cost or cost per available seat mile (CASM) – excluding fuel, third-party business expenses and profit sharing – increased 5% year over year, primarily due to the labor deals ratified.
Liquidity
United Continental exited the quarter with $6.4 billion in unrestricted liquidity, which included its $2 billion revolving credit facility. The carrier generated $547 million in operating cash flow in the quarter under review.
Guidance
United Continental expects consolidated PRASM to increase in the band of 1% to 3% in the second quarter. Consolidated capacity is projected to increase in the range of 3% to 4% in the second quarter of 2017. The company expects pre-tax margin (adjusted) in the range of 10%–12% and fuel price per gallon is expected in the band of $1.72 to $1.77 in the same period. In addition, unit costs (excluding Fuel, Profit Sharing & Third Party business costs) are anticipated to increase in the band of 4% to 5% due to higher labor costs.
Notably, labor deals are in vogue in the airline space. Not only United Continental, but other players in the space like Southwest Airlines (LUV - Free Report) and American Airlines Group (AAL - Free Report) too have signed deals with various labor groups over the past few months.
Another Apology from CEO
United Continental’s CEO, Oscar Munoz, issued yet another apology while releasing earnings results, for the well-documented “passenger dragging” incident at Chicago’s O’Hare International Airport. Munoz called the incident a “humbling” one for which he took full responsibility as the head of the company. Additionally, he promised that the company would leave no stone unturned to improve the flying experience of its passengers.
Following the incident, the company has taken several steps to revive its battered image. It offered to refund all the 70 passengers, who were on board the infamous flight. The carrier has also changed its policy on crew-booking to avoid repetition of the incident. Evidently, the CEO’s latest apology is another step in that direction.
Price Performance
The United Continental stock has struggled of late, underperforming the Zacks categorized Transportation-Airline industry in the last three months. The stock was down 3.7%, while the industry gained 2.6%.
The earnings beat might provide the stock with the much-needed boost.
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United Continental (UAL) Beats on Q1 Earnings & Revenues
United Continental Holdings (UAL - Free Report) , which has been vehemently criticized for the passenger fiasco on flight 3411 on Apr 9, finally witnessed some good tidings with better-than-expected earnings and revenues in the first quarter of 2017.
The Chicago-based carrier’s first-quarter 2017 earnings (on an adjusted basis) of 41 cents per share beat the Zacks Consensus Estimate by 4 cents. The bottom line, however, plunged 66.7% year over year due to higher costs.
Operating revenues of $8,420 million in the first quarter were marginally ahead of the Zacks Consensus Estimate of $8,362.5 million. Revenues increased 2.7% on a year-over-year basis.
In fact, United Continental is the second major carrier after Delta Air Lines (DAL - Free Report) to report better-than-expected earnings in the ongoing earnings season.
Operating Results
Consolidated passenger revenue per available seat mile (PRASM or unit revenues) was flat at 12 cents on a year-over- year basis. Yield on a consolidated basis increased 0.4% from the first quarter of 2016, while passenger revenues increased 2.6% to $7,174 million. Cargo and other revenues increased 13.4% and 1.5%, respectively. During the reported quarter, airline traffic measured in revenue passenger miles, improved 2.2% year over year on a consolidated basis. Also, capacity (or available seat miles) grew 2.6%, which led to a 30 basis point decline in load factor (percentage of seats filled with passengers) to 79.6% because capacity expansion outweighed traffic growth.
Moreover, average fuel price (on a consolidated basis) per gallon, excluding hedge losses, increased 41.3% year over year to $1.71. Total operating expenses, excluding special items, grew 10% year over year to $8.1 billion. Consolidated unit cost or cost per available seat mile (CASM) – excluding fuel, third-party business expenses and profit sharing – increased 5% year over year, primarily due to the labor deals ratified.
Liquidity
United Continental exited the quarter with $6.4 billion in unrestricted liquidity, which included its $2 billion revolving credit facility. The carrier generated $547 million in operating cash flow in the quarter under review.
Guidance
United Continental expects consolidated PRASM to increase in the band of 1% to 3% in the second quarter. Consolidated capacity is projected to increase in the range of 3% to 4% in the second quarter of 2017. The company expects pre-tax margin (adjusted) in the range of 10%–12% and fuel price per gallon is expected in the band of $1.72 to $1.77 in the same period. In addition, unit costs (excluding Fuel, Profit Sharing & Third Party business costs) are anticipated to increase in the band of 4% to 5% due to higher labor costs.
Notably, labor deals are in vogue in the airline space. Not only United Continental, but other players in the space like Southwest Airlines (LUV - Free Report) and American Airlines Group (AAL - Free Report) too have signed deals with various labor groups over the past few months.
Another Apology from CEO
United Continental’s CEO, Oscar Munoz, issued yet another apology while releasing earnings results, for the well-documented “passenger dragging” incident at Chicago’s O’Hare International Airport. Munoz called the incident a “humbling” one for which he took full responsibility as the head of the company. Additionally, he promised that the company would leave no stone unturned to improve the flying experience of its passengers.
Following the incident, the company has taken several steps to revive its battered image. It offered to refund all the 70 passengers, who were on board the infamous flight. The carrier has also changed its policy on crew-booking to avoid repetition of the incident. Evidently, the CEO’s latest apology is another step in that direction.
Price Performance
The United Continental stock has struggled of late, underperforming the Zacks categorized Transportation-Airline industry in the last three months. The stock was down 3.7%, while the industry gained 2.6%.
The earnings beat might provide the stock with the much-needed boost.
Zacks Rank
United Continental currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>