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United (UAL) Up 6.1% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for United Airlines (UAL - Free Report) . Shares have added about 6.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Narrower-Than-Expected Loss in Q3
United Airlines incurred a loss (excluding $2.46 from non-recurring items) of $1.02 per share in the third quarter of 2021, narrower than the Zacks Consensus Estimate of a loss of $1.65. The amount of loss has narrowed by 87.5% from the year-ago period. This is the seventh consecutive quarterly loss incurred by the company as air-travel demand continues to be below the pre-pandemic levels despite improving.
Operating revenues of $7,750 million surpassed the Zacks Consensus Estimate of $7639.7 million. The top line surged more than 200% year over year with passenger revenues accounting for 85.6% of the top line, soaring more than 300% to $6,637 million. This reflects the improvement in air-travel demand from the pandemic-led lows. The airline’s CEO, Scott Kirby, said that the Delta-variant woes delayed the company’s recovery. But the carrier is poised to take advantage of the recovery in business travel and the re-opening of European borders next month, Kirby added.
Nevertheless, with air-travel demand continuing to be below the pre-pandemic levels, total revenues declined 31.9% from the third quarter of 2019 (pre-pandemic). Passenger revenues dropped 36.7% from the 2019 level, while cargo revenues jumped 84% to $519 million. Revenues from other sources dipped 3.7% from the third quarter of 2019 to $594 million.
Operating Results
Below we present all comparisons (in % terms) with third-quarter 2019.
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 11.7% from the 2019 level to 12.32 cents. Total revenue per available seat mile (TRASM) declined 5.1% to 14.38 cents. On a consolidated basis, average yield per revenue passenger mile dipped 0.2% to 16.18 cents.
Consolidated airline traffic, measured in revenue passenger miles, fell 36.5%, while capacity, measured in available seat miles, decreased 28.2%. Consolidated load factor (percentage of seat occupancy) deteriorated to 76.1% from 86.1% in the third quarter of 2019 as traffic declined more than the drop in capacity. Average aircraft fuel price per gallon increased 5.9% to $2.14. Fuel gallons consumed were down 29.5%.
Adjusted operating expenses fell 17.6% to $6,068 million. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit-sharing and special charges, ascended 14.9%.
United Airlines exited the third quarter with cash and cash equivalents of $19,256 million compared with $11,269 million at the end of 2020. Long-term debt at the end of the reported quarter was $31,520 million compared with $24,836 million at the end of December 2020. This Zacks Rank #3 (Hold) company exited the quarter with total available liquidity of approximately $21 billion.
Outlook
United Airlines expects fourth-quarter capacity to decline approximately 23% from the comparable period in 2019. Total revenues are anticipated to decline 25-30% from the fourth quarter of 2019. The company estimates CASM, excluding fuel, third-party business expenses, profit-sharing and special charges, to increase 12-14% from the fourth-quarter 2019 level. It expects the metric to be lower next year compared with the 2019 level. Fuel price is predicted to be $2.39 per gallon in the fourth quarter. Anticipating growth in international traffic, the carrier expects to increase 2022 capacity by 5% from the 2019 level. United Airlines forecasts capital expenditures to be approximately $3 billion in 2021.
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 -198.28% due to these changes.
VGM Scores
At this time, United has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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. Notably, United has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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United (UAL) Up 6.1% 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 6.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Narrower-Than-Expected Loss in Q3
United Airlines incurred a loss (excluding $2.46 from non-recurring items) of $1.02 per share in the third quarter of 2021, narrower than the Zacks Consensus Estimate of a loss of $1.65. The amount of loss has narrowed by 87.5% from the year-ago period. This is the seventh consecutive quarterly loss incurred by the company as air-travel demand continues to be below the pre-pandemic levels despite improving.
Operating revenues of $7,750 million surpassed the Zacks Consensus Estimate of $7639.7 million. The top line surged more than 200% year over year with passenger revenues accounting for 85.6% of the top line, soaring more than 300% to $6,637 million. This reflects the improvement in air-travel demand from the pandemic-led lows. The airline’s CEO, Scott Kirby, said that the Delta-variant woes delayed the company’s recovery. But the carrier is poised to take advantage of the recovery in business travel and the re-opening of European borders next month, Kirby added.
Nevertheless, with air-travel demand continuing to be below the pre-pandemic levels, total revenues declined 31.9% from the third quarter of 2019 (pre-pandemic). Passenger revenues dropped 36.7% from the 2019 level, while cargo revenues jumped 84% to $519 million. Revenues from other sources dipped 3.7% from the third quarter of 2019 to $594 million.
Operating Results
Below we present all comparisons (in % terms) with third-quarter 2019.
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 11.7% from the 2019 level to 12.32 cents. Total revenue per available seat mile (TRASM) declined 5.1% to 14.38 cents. On a consolidated basis, average yield per revenue passenger mile dipped 0.2% to 16.18 cents.
Consolidated airline traffic, measured in revenue passenger miles, fell 36.5%, while capacity, measured in available seat miles, decreased 28.2%. Consolidated load factor (percentage of seat occupancy) deteriorated to 76.1% from 86.1% in the third quarter of 2019 as traffic declined more than the drop in capacity. Average aircraft fuel price per gallon increased 5.9% to $2.14. Fuel gallons consumed were down 29.5%.
Adjusted operating expenses fell 17.6% to $6,068 million. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit-sharing and special charges, ascended 14.9%.
United Airlines exited the third quarter with cash and cash equivalents of $19,256 million compared with $11,269 million at the end of 2020. Long-term debt at the end of the reported quarter was $31,520 million compared with $24,836 million at the end of December 2020. This Zacks Rank #3 (Hold) company exited the quarter with total available liquidity of approximately $21 billion.
Outlook
United Airlines expects fourth-quarter capacity to decline approximately 23% from the comparable period in 2019. Total revenues are anticipated to decline 25-30% from the fourth quarter of 2019. The company estimates CASM, excluding fuel, third-party business expenses, profit-sharing and special charges, to increase 12-14% from the fourth-quarter 2019 level. It expects the metric to be lower next year compared with the 2019 level. Fuel price is predicted to be $2.39 per gallon in the fourth quarter. Anticipating growth in international traffic, the carrier expects to increase 2022 capacity by 5% from the 2019 level. United Airlines forecasts capital expenditures to be approximately $3 billion in 2021.
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 -198.28% due to these changes.
VGM Scores
At this time, United has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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. Notably, United has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.