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 12.1% Since Last Earnings Report: Can It Continue?
Read MoreHide Full Article
A month has gone by since the last earnings report for United Airlines (UAL - Free Report) . Shares have added about 12.1% 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 the most recent earnings report in order to get a better handle on the important drivers.
Wider-Than-Expected Loss in Q1
United Airlines incurred a loss (excluding $3.21 from non-recurring items) of $7.5 per share in the first quarter of 2021, wider than the Zacks Consensus Estimate of a loss of $6.97. This is the fifth consecutive quarterly loss incurred by the company as coronavirus continues to weigh on air-travel demand.
Operating revenues of $3,221 million also fell short of the Zacks Consensus Estimate of $3,253.1 million. The top line plunged 59.6% year over year due to passenger revenues (which totaled $2,316 million in the reported quarter) seeing a 67.2% drop. However, cargo revenues surged 88.3% year over year to $497 million. Meanwhile revenues from other sources declined 37.2% to $408 million.
Operating Results
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 34.2% year over year to 7.63 cents. Total revenue per available seat mile (TRASM) fell 18.9% to 10.61 cents. On a consolidated basis, average yield per revenue passenger mile declined 17.8% from the year-ago quarter.
During the quarter under review, consolidated airline traffic, measured in revenue passenger miles, tumbled 60.1% year over year. Capacity (measured in available seat miles) contracted 50.2%. Consolidated load factor (percentage of seat occupancy) deteriorated 14.1 percentage points year over year to 56.8% as traffic decline was more than capacity contraction. Meanwhile, average fuel price per gallon decreased 8.4% year over year to $1.74. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 46.2% to 490 million.
Owing to its cost-reduction initiatives, the Chicago-based carrier was able to bring down adjusted operating costs by 28.3% year over year. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit-sharing and special charges, escalated by 43.8% mainly due to capacity cuts.
United Airlines exited the first quarter of 2021 with cash and cash equivalents of $12.67 billion compared with $11.27 billion at the end of 2020. Long-term debt at the end of the reported quarter was $25.85 billion compared with $24.84 billion at the end of December 2020.
Other Details
During first-quarter 2021, core cash burn averaged $9 million per day, indicating an improvement of about $10 million per day in the fourth quarter of 2020. This company exited the quarter with total available liquidity of $21 billion.
Outlook
United Airlines anticipates second-quarter 2021 TRASM to decline approximately 20% compared with the second quarter of 2019. Additionally, capacity is expected to decrease around 45% from the second-quarter 2019 levels. Further, the company estimates operating expenses, excluding special charges, to drop approximately 32% from the 2019 levels. Fuel price per gallon is estimated to be approximately $1.83. Adjusted EBITDA margin is predicted to be approximately (20%) in the second quarter.
Having already generated positive core cash flow on an adjusted basis in March, the company aims to return positive adjusted EBITDA margins “even if business and long-haul international demand remain as much as 70% below 2019 levels”.
The company, which is witnessing evidences of pent-up demand for air travel, now sees “a clear path to profitability”. It is confident of being able to achieve its goal of exceeding 2019 adjusted EBITDA margins in 2023 or sooner, the airline’s CEO Scott Kirby stated.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -13.26% 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. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 12.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for United Airlines (UAL - Free Report) . Shares have added about 12.1% 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 the most recent earnings report in order to get a better handle on the important drivers.
Wider-Than-Expected Loss in Q1
United Airlines incurred a loss (excluding $3.21 from non-recurring items) of $7.5 per share in the first quarter of 2021, wider than the Zacks Consensus Estimate of a loss of $6.97. This is the fifth consecutive quarterly loss incurred by the company as coronavirus continues to weigh on air-travel demand.
Operating revenues of $3,221 million also fell short of the Zacks Consensus Estimate of $3,253.1 million. The top line plunged 59.6% year over year due to passenger revenues (which totaled $2,316 million in the reported quarter) seeing a 67.2% drop. However, cargo revenues surged 88.3% year over year to $497 million. Meanwhile revenues from other sources declined 37.2% to $408 million.
Operating Results
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 34.2% year over year to 7.63 cents. Total revenue per available seat mile (TRASM) fell 18.9% to 10.61 cents. On a consolidated basis, average yield per revenue passenger mile declined 17.8% from the year-ago quarter.
During the quarter under review, consolidated airline traffic, measured in revenue passenger miles, tumbled 60.1% year over year. Capacity (measured in available seat miles) contracted 50.2%. Consolidated load factor (percentage of seat occupancy) deteriorated 14.1 percentage points year over year to 56.8% as traffic decline was more than capacity contraction. Meanwhile, average fuel price per gallon decreased 8.4% year over year to $1.74. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 46.2% to 490 million.
Owing to its cost-reduction initiatives, the Chicago-based carrier was able to bring down adjusted operating costs by 28.3% year over year. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit-sharing and special charges, escalated by 43.8% mainly due to capacity cuts.
United Airlines exited the first quarter of 2021 with cash and cash equivalents of $12.67 billion compared with $11.27 billion at the end of 2020. Long-term debt at the end of the reported quarter was $25.85 billion compared with $24.84 billion at the end of December 2020.
Other Details
During first-quarter 2021, core cash burn averaged $9 million per day, indicating an improvement of about $10 million per day in the fourth quarter of 2020. This company exited the quarter with total available liquidity of $21 billion.
Outlook
United Airlines anticipates second-quarter 2021 TRASM to decline approximately 20% compared with the second quarter of 2019. Additionally, capacity is expected to decrease around 45% from the second-quarter 2019 levels. Further, the company estimates operating expenses, excluding special charges, to drop approximately 32% from the 2019 levels. Fuel price per gallon is estimated to be approximately $1.83. Adjusted EBITDA margin is predicted to be approximately (20%) in the second quarter.
Having already generated positive core cash flow on an adjusted basis in March, the company aims to return positive adjusted EBITDA margins “even if business and long-haul international demand remain as much as 70% below 2019 levels”.
The company, which is witnessing evidences of pent-up demand for air travel, now sees “a clear path to profitability”. It is confident of being able to achieve its goal of exceeding 2019 adjusted EBITDA margins in 2023 or sooner, the airline’s CEO Scott Kirby stated.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -13.26% 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. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.