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United (UAL) Up 8.8% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for United Airlines (UAL - Free Report) . Shares have added about 8.8% 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 Q2
The company incurred a loss (excluding $3.52 from non-recurring items) of $9.31 per share, comparing unfavorably with the Zacks Consensus Estimate of a loss of $9.13. Results were hurt by the coronavirus-induced weakness in air-travel demand.
Even though operating revenues of $1,475 million slumped 87.1% year over year, the same beat the Zacks Consensus Estimate of $1,217 million. This year-over-year plunge was due to the 93.5% drop in passenger revenues. However, the carrier’s move to operate cargo-only flights in the face of declining passenger revenues paid off as revenues from the same surged 36.3% year over year. Meanwhile revenues from other sources declined 36.9% in the June quarter.
Operating Results
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 46.9% year over year to 7.6 cents. Total revenue per available seat mile, however, increased 5.7%. On a consolidated basis, average yield per revenue passenger mile jumped 37.8% from the year-ago quarter.
During the quarter under review, consolidated airline traffic, measured in revenue passenger miles, tumbled 95.3% year over year. Capacity (or available seat miles) contracted 87.8%. Consolidated load factor (percentage of seat occupancy) deteriorated 5290 percentage points to 33.1% as traffic decline was more than capacity contraction. Meanwhile, average fuel price per gallon fell 45.4% year over year to $1.18. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 81.5% to 204 million.
Total adjusted operating expenses declined 41.4% year over year to $4,263 million in the reported quarter. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit sharing and special charges escalated in excess of 100%.
United Airlines exited the second quarter with cash and cash equivalents of $6,505 million compared with $2,762 million at 2019 end. Long-term debt at the end of the reported quarter was $14,318 million compared with $13,145 million at 2019 end.
Other Details
During the June quarter, cash burn averaged $40 million a day including $3 million of principal payments and severance expenses. The carrier expects average daily cash burn to be approximately $25 million for the September quarter (including $6 million of principal payments and severance expenses). Liquidity at the end of the third quarter is forecast to be more than $18 billion. Consolidated system capacity is expected to tank 65% year over year during the period. Adjusted capital expenditures for the current year are anticipated to be approximately $3.7 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -24.38% due to these changes.
VGM Scores
At this time, United has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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.
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United (UAL) Up 8.8% 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 8.8% 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 Q2
The company incurred a loss (excluding $3.52 from non-recurring items) of $9.31 per share, comparing unfavorably with the Zacks Consensus Estimate of a loss of $9.13. Results were hurt by the coronavirus-induced weakness in air-travel demand.
Even though operating revenues of $1,475 million slumped 87.1% year over year, the same beat the Zacks Consensus Estimate of $1,217 million. This year-over-year plunge was due to the 93.5% drop in passenger revenues. However, the carrier’s move to operate cargo-only flights in the face of declining passenger revenues paid off as revenues from the same surged 36.3% year over year. Meanwhile revenues from other sources declined 36.9% in the June quarter.
Operating Results
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 46.9% year over year to 7.6 cents. Total revenue per available seat mile, however, increased 5.7%. On a consolidated basis, average yield per revenue passenger mile jumped 37.8% from the year-ago quarter.
During the quarter under review, consolidated airline traffic, measured in revenue passenger miles, tumbled 95.3% year over year. Capacity (or available seat miles) contracted 87.8%. Consolidated load factor (percentage of seat occupancy) deteriorated 5290 percentage points to 33.1% as traffic decline was more than capacity contraction. Meanwhile, average fuel price per gallon fell 45.4% year over year to $1.18. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 81.5% to 204 million.
Total adjusted operating expenses declined 41.4% year over year to $4,263 million in the reported quarter. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit sharing and special charges escalated in excess of 100%.
United Airlines exited the second quarter with cash and cash equivalents of $6,505 million compared with $2,762 million at 2019 end. Long-term debt at the end of the reported quarter was $14,318 million compared with $13,145 million at 2019 end.
Other Details
During the June quarter, cash burn averaged $40 million a day including $3 million of principal payments and severance expenses. The carrier expects average daily cash burn to be approximately $25 million for the September quarter (including $6 million of principal payments and severance expenses). Liquidity at the end of the third quarter is forecast to be more than $18 billion. Consolidated system capacity is expected to tank 65% year over year during the period. Adjusted capital expenditures for the current year are anticipated to be approximately $3.7 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -24.38% due to these changes.
VGM Scores
At this time, United has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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.