We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
United (UAL) Up 5.6% Since Last Earnings Report: Can It Continue?
Read MoreHide Full Article
It has been about a month since the last earnings report for United Airlines (UAL - Free Report) . Shares have added about 5.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is United due for a pullback? 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.
Wider-Than-Expected Loss in Q4
United Airlines incurred a loss (excluding 6 cents from non-recurring items) of $7 per share in the fourth quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $6.56. Results were hurt by coronavirus-induced weakness in air-travel demand.
Operating revenues of $3,412 million lagged the Zacks Consensus Estimate of $3,420.4 million. The top line plunged 68.7% year over year due to 75.7% drop in passenger revenues, which totaled $2,410 million in the reported quarter. However, cargo revenues surged 77.2% year over year to $560 million. Meanwhile revenues from other sources declined 30.8% to $442 million.
Operating Results
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 43.8% year over year to 7.85 cents. Total revenue per available seat mile fell 27.5% to 11.12 cents. On a consolidated basis, average yield per revenue passenger mile dipped 16.6% from the year-ago quarter.
During the quarter under review, consolidated airline traffic, measured in revenue passenger miles, tumbled 70.9% year over year. Capacity (measured in available seat miles) contracted 56.8%. Consolidated load factor (percentage of seat occupancy) deteriorated 26.9 percentage points year over year to 55.6% as traffic decline was more than capacity contraction. Meanwhile, average fuel price per gallon fell 35.7% year over year to $1.35. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 53% to 503 million.
Owing to its cost-reduction initiatives, the Chicago-based carrier was able to bring down operating costs (excluding special charges) by 42.4% on a year-over-year basis. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit-sharing and special charges, escalated by 54.6% mainly due to capacity cuts.
United Airlines exited the fourth quarter with cash and cash equivalents of $11.27 billion compared with $2.76 billion at 2019 end. Long-term debt at the end of the reported quarter was $24.84 billion compared with $13.14 billion at 2019 end.
Other Details
During the December quarter, cash burn averaged $33 million a day including $10 million of average debt principal payments and severance payments per day. This compares unfavorably with the daily cash burn of $25 million, including $4 million of principal payments and severance expenses, recorded in third-quarter 2020. The company exited the quarter with total available liquidity of $19.7 billion.
Q1 Outlook
The carrier estimates total operating revenues to decline 65-70% compared with first-quarter 2019 in the March quarter. The carrier stated that the outlook does not include the potential impact from accelerated COVID-19 vaccine distribution, which may lead to faster recovery in air-travel demand.
United Airlines anticipates capacity to fall at least 51% from the comparable period in 2019. Available liquidity at the end of the period is expected to be similar to that at the end of 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -41.03% due to these changes.
VGM Scores
At this time, United has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise United has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
United (UAL) Up 5.6% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for United Airlines (UAL - Free Report) . Shares have added about 5.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is United due for a pullback? 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.
Wider-Than-Expected Loss in Q4
United Airlines incurred a loss (excluding 6 cents from non-recurring items) of $7 per share in the fourth quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $6.56. Results were hurt by coronavirus-induced weakness in air-travel demand.
Operating revenues of $3,412 million lagged the Zacks Consensus Estimate of $3,420.4 million. The top line plunged 68.7% year over year due to 75.7% drop in passenger revenues, which totaled $2,410 million in the reported quarter. However, cargo revenues surged 77.2% year over year to $560 million. Meanwhile revenues from other sources declined 30.8% to $442 million.
Operating Results
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 43.8% year over year to 7.85 cents. Total revenue per available seat mile fell 27.5% to 11.12 cents. On a consolidated basis, average yield per revenue passenger mile dipped 16.6% from the year-ago quarter.
During the quarter under review, consolidated airline traffic, measured in revenue passenger miles, tumbled 70.9% year over year. Capacity (measured in available seat miles) contracted 56.8%. Consolidated load factor (percentage of seat occupancy) deteriorated 26.9 percentage points year over year to 55.6% as traffic decline was more than capacity contraction. Meanwhile, average fuel price per gallon fell 35.7% year over year to $1.35. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 53% to 503 million.
Owing to its cost-reduction initiatives, the Chicago-based carrier was able to bring down operating costs (excluding special charges) by 42.4% on a year-over-year basis. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit-sharing and special charges, escalated by 54.6% mainly due to capacity cuts.
United Airlines exited the fourth quarter with cash and cash equivalents of $11.27 billion compared with $2.76 billion at 2019 end. Long-term debt at the end of the reported quarter was $24.84 billion compared with $13.14 billion at 2019 end.
Other Details
During the December quarter, cash burn averaged $33 million a day including $10 million of average debt principal payments and severance payments per day. This compares unfavorably with the daily cash burn of $25 million, including $4 million of principal payments and severance expenses, recorded in third-quarter 2020. The company exited the quarter with total available liquidity of $19.7 billion.
Q1 Outlook
The carrier estimates total operating revenues to decline 65-70% compared with first-quarter 2019 in the March quarter. The carrier stated that the outlook does not include the potential impact from accelerated COVID-19 vaccine distribution, which may lead to faster recovery in air-travel demand.
United Airlines anticipates capacity to fall at least 51% from the comparable period in 2019. Available liquidity at the end of the period is expected to be similar to that at the end of 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -41.03% due to these changes.
VGM Scores
At this time, United has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise United has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.