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United (UAL) Shares Plummet, Airline Stocks Follow
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Shares of United (UAL - Free Report) sunk over 11% on Thursday after the airline announced it will continue to expand its flying capacity amid a rise in overall operating expenses.
United, one of the largest U.S. airline companies, reported third-quarter earnings and revenues that beat expectations on Wednesday—in the face of the recent series of tropical storms and hurricanes that forced the company to cancel thousands of flights (also read: United Continental (UAL - Free Report) Q3 Earnings & Revenues Top Estimates).
United canceled 8,300 flights due to Hurricanes Harvey, Irma, and Maria, which cost the company an estimated $185 million and helped lead to a 0.4% decline in revenues. On top of that, the company’s earnings plummeted 29.6%, while net income sunk 34%.
Tropical storms clearly damaged the Chicago-based airline giant’s bottom line. But what has investors worried isn’t the wave of hurricanes, it’s the increased competition that has forced the airline company’s costs to rise.
United’s operating expenses climbed 6% to $8.8 billion in the third quarter, while consolidated unit cost per available seat mile rose 3%. The company cited higher labor expenses and fuel costs as a reason for the big jump in these costs.
The company’s passenger revenues per available seat mile also fell well over 3%. And United now projects its unit revenues will sink between 1% and 3% in its fourth quarter.
Consequently, United will reportedly bump up capacity by 3.5% in the fourth quarter, in order to maintain its market share at major airport hubs.
The move comes amid shrinking profits as low-cost airlines, such as Spirit Airlines (SAVE - Free Report) , drive down ticket costs and lure passengers away from larger, more expensive carriers.
Investors now fear that United will have a harder time boosting its bottom line as it spends more to fight off the new wave of competition. Shares of United fell on Wednesday and now rest about 28% below their 52-week high. United is currently a Zacks Rank #5 (Strong Sell).
Other Airlines
United’s struggle to increase profits amid greater competition caused turbulence throughout the U.S. airline industry—where even its new, low-cost opponents sunk on Thursday as the fight for passengers heats up.
Shares of Spirit tanked over 3.70%, while fellow budget-minded carriers JetBlue (JBLU - Free Report) and Southwest Airlines (LUV - Free Report) saw their stock prices dip marginally. Big U.S. airline companies Delta (DAL - Free Report) and American Airlines (AAL - Free Report) sank 1% and 2%, respectively. The US Global Jets ETF (JETS - Free Report) suffered a 1.30% decline.
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United (UAL) Shares Plummet, Airline Stocks Follow
Shares of United (UAL - Free Report) sunk over 11% on Thursday after the airline announced it will continue to expand its flying capacity amid a rise in overall operating expenses.
United, one of the largest U.S. airline companies, reported third-quarter earnings and revenues that beat expectations on Wednesday—in the face of the recent series of tropical storms and hurricanes that forced the company to cancel thousands of flights (also read: United Continental (UAL - Free Report) Q3 Earnings & Revenues Top Estimates).
United canceled 8,300 flights due to Hurricanes Harvey, Irma, and Maria, which cost the company an estimated $185 million and helped lead to a 0.4% decline in revenues. On top of that, the company’s earnings plummeted 29.6%, while net income sunk 34%.
Tropical storms clearly damaged the Chicago-based airline giant’s bottom line. But what has investors worried isn’t the wave of hurricanes, it’s the increased competition that has forced the airline company’s costs to rise.
United’s operating expenses climbed 6% to $8.8 billion in the third quarter, while consolidated unit cost per available seat mile rose 3%. The company cited higher labor expenses and fuel costs as a reason for the big jump in these costs.
The company’s passenger revenues per available seat mile also fell well over 3%. And United now projects its unit revenues will sink between 1% and 3% in its fourth quarter.
Consequently, United will reportedly bump up capacity by 3.5% in the fourth quarter, in order to maintain its market share at major airport hubs.
The move comes amid shrinking profits as low-cost airlines, such as Spirit Airlines (SAVE - Free Report) , drive down ticket costs and lure passengers away from larger, more expensive carriers.
Investors now fear that United will have a harder time boosting its bottom line as it spends more to fight off the new wave of competition. Shares of United fell on Wednesday and now rest about 28% below their 52-week high. United is currently a Zacks Rank #5 (Strong Sell).
Other Airlines
United’s struggle to increase profits amid greater competition caused turbulence throughout the U.S. airline industry—where even its new, low-cost opponents sunk on Thursday as the fight for passengers heats up.
Shares of Spirit tanked over 3.70%, while fellow budget-minded carriers JetBlue (JBLU - Free Report) and Southwest Airlines (LUV - Free Report) saw their stock prices dip marginally. Big U.S. airline companies Delta (DAL - Free Report) and American Airlines (AAL - Free Report) sank 1% and 2%, respectively. The US Global Jets ETF (JETS - Free Report) suffered a 1.30% decline.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>