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Airline Stock Roundup: UAL Q4 Earnings, AAL's Expansion Update, DAL & LUV in Focus
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It was a week which saw the Chicago-based United Continental Holdings (UAL - Free Report) reporting better-than-expected results in the fourth quarter. The carrier posted a marginal increase in passenger revenues per available seat miles (PRASM: a key measure of unit revenues) on a year-over-year basis.
On the non-earnings front, American Airlines Group (AAL - Free Report) grabbed headlines by virtue of its passenger-friendly decision to expand its network in the current year. Notably, the carrier announced introduction of 52 nonstop flights to its domestic and international schedule. It also intends to launch hourly shuttle service connecting Chicago-O’Hare and New York-LaGuardia from Apr 4.
Another key player in the airline space, Delta Air Lines (DAL - Free Report) , was also in news during the week due to its decision to tighten rules for passengers travelling with pets on its flights from Mar 1. In another development, Southwest Airlines (LUV - Free Report) hit the headlines when the company joined some other carriers in introducing additional flights for the Big Game.
1. United Continental’s fourth-quarter 2017 earnings (on an adjusted basis) of $1.40 per share surpassed the Zacks Consensus Estimate by 6 cents. However, the bottom line declined 21.4% on a year-over-year basis due to higher costs. Operating revenues of $9, 438 million were marginally ahead of the Zacks Consensus Estimate of $9,427.9 million. The top line also increased 4.3% on a year-over-year basis.
Consolidated passenger revenue per available seat mile (PRASM or unit revenues) increased 0.2% to 12.43 cents on a year-over-year basis. While average yield per revenue passenger mile on a consolidated basis were up 0.9% from the year-ago quarter, passenger revenues rose 4.1% to $8,080 million. Cargo and other revenues increased a respective 21.6% and 1.2%.
Consolidated unit cost or cost per available seat mile (CASM) – excluding fuel, third-party business expenses and profit sharing – improved 1.5% year over year primarily on high labor costs. Average aircraft fuel price per gallon, excluding hedge losses, (on a consolidated basis) increased 19.4% to $1.91 per gallon.
This Chicago-based company expects consolidated PRASM growth in the band of 0% to 2% (year over year) for the first quarter of 2018. Consolidated capacity, which increased 4% in the fourth quarter of 2017, is projected to increase approximately between 3.5% and 4.5% in the current quarter.
The company expects pre-tax margin (adjusted) to be flat in the same time period. In addition, unit costs (excluding Fuel, Profit Sharing & Third Party business costs) are anticipated to increase in the band of 0% to 1%. Average fuel cost per gallon in the first quarter is projected to be approximately $2.11.
For 2018, capacity is anticipated to expand in the band of 4% to 6%. Capital expenditure is also projected between $3.6 billion and $3.8 billion. Non-fuel unit costs are expected in the range of -1% and 0% (year over year). The company expects 2018 earnings per share in the band of $6.50 to $8.50.
The Zacks Consensus Estimate for 2018 earnings is pegged at $6.63 per share. The company targets earnings between $11.00 and $13.00 for 2020 (EPS compounded annual growth rate of approximately 25% in the 2018-2020 period).
2. In a bid to expand its global presence, American Airlines intends to introduce multiple new routes this year. As part of its expansion drive, the carrier had recently announced its decision to start flights to places like Budapest, Prague and Reykjavik from this summer. The company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3. Delta announced a change in its policy pertaining to onboard service animals from Mar 1. Risks related to untrained animals in planes due to lack of regulations led to the change in policy. The company’s flights have witnessed an approximately 150% rise pertaining to service and support animals since 2015.
Under the new rules, Delta requires the concerned passengers to furnish documents underlining the passenger's need for carrying the animal on the flight. Furthermore, the person has to provide proof related to its training and vaccinations within 48 hours before the flight.
4. Southwest Airlines will operate non-stop flights connecting Boston and Minneapolis in a bid to help football fans travel to and from the big game. This low-cost carrier has also decided to operate flights between Minneapolis and Philadelphia for the same purpose.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
The table above shows that all airline stocks barring GOL Linhas traded in the red over the past week. Over the course of six months, the NYSE ARCA Airline Index appreciated 5% on the back of GOL Linhas huge gain (83.7%).
What's Next in the Airline Space?
The coming week will be flooded by earnings reports from major players in the airline sector like JetBlue Airways (JBLU - Free Report) , Southwest Airlines, Alaska Air Group (ALK - Free Report) , Hawaiian Holdings (HA - Free Report) and American Airlines Group. While JetBlue, Southwest, Alaska Air and American Airlines will report on Jan 25, Hawaiian will do so on Jan 29.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Airline Stock Roundup: UAL Q4 Earnings, AAL's Expansion Update, DAL & LUV in Focus
It was a week which saw the Chicago-based United Continental Holdings (UAL - Free Report) reporting better-than-expected results in the fourth quarter. The carrier posted a marginal increase in passenger revenues per available seat miles (PRASM: a key measure of unit revenues) on a year-over-year basis.
On the non-earnings front, American Airlines Group (AAL - Free Report) grabbed headlines by virtue of its passenger-friendly decision to expand its network in the current year. Notably, the carrier announced introduction of 52 nonstop flights to its domestic and international schedule. It also intends to launch hourly shuttle service connecting Chicago-O’Hare and New York-LaGuardia from Apr 4.
Another key player in the airline space, Delta Air Lines (DAL - Free Report) , was also in news during the week due to its decision to tighten rules for passengers travelling with pets on its flights from Mar 1. In another development, Southwest Airlines (LUV - Free Report) hit the headlines when the company joined some other carriers in introducing additional flights for the Big Game.
Transportation - Airline Industry 5YR % Return
Transportation - Airline Industry 5YR % Return
(Read the last Airline Stock Roundup for Jan 17, 2018).
Recap of the Past Week’s Most Important Stories
1. United Continental’s fourth-quarter 2017 earnings (on an adjusted basis) of $1.40 per share surpassed the Zacks Consensus Estimate by 6 cents. However, the bottom line declined 21.4% on a year-over-year basis due to higher costs. Operating revenues of $9, 438 million were marginally ahead of the Zacks Consensus Estimate of $9,427.9 million. The top line also increased 4.3% on a year-over-year basis.
Consolidated passenger revenue per available seat mile (PRASM or unit revenues) increased 0.2% to 12.43 cents on a year-over-year basis. While average yield per revenue passenger mile on a consolidated basis were up 0.9% from the year-ago quarter, passenger revenues rose 4.1% to $8,080 million. Cargo and other revenues increased a respective 21.6% and 1.2%.
Consolidated unit cost or cost per available seat mile (CASM) – excluding fuel, third-party business expenses and profit sharing – improved 1.5% year over year primarily on high labor costs. Average aircraft fuel price per gallon, excluding hedge losses, (on a consolidated basis) increased 19.4% to $1.91 per gallon.
This Chicago-based company expects consolidated PRASM growth in the band of 0% to 2% (year over year) for the first quarter of 2018. Consolidated capacity, which increased 4% in the fourth quarter of 2017, is projected to increase approximately between 3.5% and 4.5% in the current quarter.
The company expects pre-tax margin (adjusted) to be flat in the same time period. In addition, unit costs (excluding Fuel, Profit Sharing & Third Party business costs) are anticipated to increase in the band of 0% to 1%. Average fuel cost per gallon in the first quarter is projected to be approximately $2.11.
For 2018, capacity is anticipated to expand in the band of 4% to 6%. Capital expenditure is also projected between $3.6 billion and $3.8 billion. Non-fuel unit costs are expected in the range of -1% and 0% (year over year). The company expects 2018 earnings per share in the band of $6.50 to $8.50.
The Zacks Consensus Estimate for 2018 earnings is pegged at $6.63 per share. The company targets earnings between $11.00 and $13.00 for 2020 (EPS compounded annual growth rate of approximately 25% in the 2018-2020 period).
2. In a bid to expand its global presence, American Airlines intends to introduce multiple new routes this year. As part of its expansion drive, the carrier had recently announced its decision to start flights to places like Budapest, Prague and Reykjavik from this summer. The company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3. Delta announced a change in its policy pertaining to onboard service animals from Mar 1. Risks related to untrained animals in planes due to lack of regulations led to the change in policy. The company’s flights have witnessed an approximately 150% rise pertaining to service and support animals since 2015.
Under the new rules, Delta requires the concerned passengers to furnish documents underlining the passenger's need for carrying the animal on the flight. Furthermore, the person has to provide proof related to its training and vaccinations within 48 hours before the flight.
4. Southwest Airlines will operate non-stop flights connecting Boston and Minneapolis in a bid to help football fans travel to and from the big game. This low-cost carrier has also decided to operate flights between Minneapolis and Philadelphia for the same purpose.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
The table above shows that all airline stocks barring GOL Linhas traded in the red over the past week. Over the course of six months, the NYSE ARCA Airline Index appreciated 5% on the back of GOL Linhas huge gain (83.7%).
What's Next in the Airline Space?
The coming week will be flooded by earnings reports from major players in the airline sector like JetBlue Airways (JBLU - Free Report) , Southwest Airlines, Alaska Air Group (ALK - Free Report) , Hawaiian Holdings (HA - Free Report) and American Airlines Group. While JetBlue, Southwest, Alaska Air and American Airlines will report on Jan 25, Hawaiian will do so on Jan 29.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>