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Why Is United (UAL) Up 4.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for United Airlines (UAL - Free Report) . Shares have added about 4.3% in that time frame, underperforming 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 Q2
United Airlines’ second-quarter 2022 earnings (excluding 43 cents from non-recurring items) of $1.43 per share fell short of the Zacks Consensus Estimate of $1.86. Escalated operating expenses induced the earnings miss. Consequently, shares declined in after-market trading on Jul 20. In the year-ago quarter, UAL incurred a loss of $3.91 per share when air-travel demand was not as buoyant as in the current scenario. The second quarter of 2022 was the first profitable quarter at UAL since the onset of the pandemic.
Operating revenues of $12,112 million marginally beat the Zacks Consensus Estimate of $12,033.7 million. Revenues increased more than 100% year over year owing to upbeat air-travel demand. The optimistic air-travel demand scenario is also evident from the fact that total operating revenues increased 6.2% from second-quarter 2019 (pre-coronavirus) levels.
The massive year-over-year increase in the top line was driven by more than a 100% rise in passenger revenues (accounting for 89.4% of the top line) to $10,829 million. Moreover, passenger revenues inched up 3.3% from the second-quarter 2019 reading. Cargo revenues skyrocketed 94.6% from second-quarter 2019 actuals to $574 million. Revenues from other sources increased 14.2% from the second-quarter 2019 tally to $709 million.
Operating Results
Below, we present all comparisons (in % terms) with the second-quarter 2019 figures.
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) increased 20.8%. Total revenue per available seat mile (TRASM) rose 24.3% to 19.35 cents. On a consolidated basis, average yield per revenue passenger mile was up 19.8% to 19.94 cents.
Consolidated airline traffic, measured in revenue passenger miles, dropped 13.8%, while capacity, measured in available seat miles, fell 14.5%. Consolidated load factor (percentage of seat occupancy) inched up 0.7 percentage points to 86.7% as the traffic decline was less than the capacity contraction. Average aircraft fuel price per gallon jumped 93.5% to $4.18. Fuel gallons consumed were down 17.2%.
Adjusted operating expenses were flat at $7,275 million. Operating expenses (on a reported basis) increased 13.1% to $11,234 million. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expenses, profit-sharing and special charges ascended 17%.
United Airlines exited the second quarter with cash and cash equivalents of $16,885 million compared with $18,283 million at the end of 2021. Long-term debt at the end of the reported quarter was $29,175 million compared with $30,361 million at the end of December 2021. UAL exited the quarter with total available liquidity of $22 billion.
Outlook
For the third quarter, United Airlines expects capacity to decline around 11% from the third-quarter level of 2019. The metric is anticipated to decline approximately 10% from the fourth-quarter 2019 actuals. Current-year capacity is likely to be 13% less than the 2019 actuals. TRASM is estimated to climb in the 24-26% band in the September quarter from the comparable period’s number in 2019. CASM, excluding fuel, third-party business expenses, profit-sharing and special charges, is anticipated to increase roughly 14% in the September and December quarters, respectively, from the corresponding 2019 levels. The metric is anticipated to increase approximately 16% and 5%, in 2022 and 2023, respectively, from the 2019 actuals.
Total operating revenues in the third quarter are likely to increase 11% from the September-quarter level of 2019. UAL forecasts the average aircraft fuel price per gallon to be $3.81 in the third quarter. Adjusted capital expenditures are predicted to be $5.2 billion for 2022. Adjusted operating margin is expected to be approximately 10% in the September quarter. UAL expects to be profitable for the full year. UAL is on track to achieve a pre-tax margin of approximately 9% in 2023 and about 14% in 2026.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 9.89% due to these changes.
VGM Scores
Currently, United has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, United has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
United is part of the Zacks Transportation - Airline industry. Over the past month, Delta Air Lines (DAL - Free Report) , a stock from the same industry, has gained 7.9%. The company reported its results for the quarter ended June 2022 more than a month ago.
Delta reported revenues of $13.82 billion in the last reported quarter, representing a year-over-year change of +94%. EPS of $1.44 for the same period compares with -$1.07 a year ago.
Delta is expected to post earnings of $1.54 per share for the current quarter, representing a year-over-year change of +413.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.4%.
Delta has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Why Is United (UAL) Up 4.3% Since Last Earnings Report?
A month has gone by since the last earnings report for United Airlines (UAL - Free Report) . Shares have added about 4.3% in that time frame, underperforming 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 Q2
United Airlines’ second-quarter 2022 earnings (excluding 43 cents from non-recurring items) of $1.43 per share fell short of the Zacks Consensus Estimate of $1.86. Escalated operating expenses induced the earnings miss. Consequently, shares declined in after-market trading on Jul 20. In the year-ago quarter, UAL incurred a loss of $3.91 per share when air-travel demand was not as buoyant as in the current scenario. The second quarter of 2022 was the first profitable quarter at UAL since the onset of the pandemic.
Operating revenues of $12,112 million marginally beat the Zacks Consensus Estimate of $12,033.7 million. Revenues increased more than 100% year over year owing to upbeat air-travel demand. The optimistic air-travel demand scenario is also evident from the fact that total operating revenues increased 6.2% from second-quarter 2019 (pre-coronavirus) levels.
The massive year-over-year increase in the top line was driven by more than a 100% rise in passenger revenues (accounting for 89.4% of the top line) to $10,829 million. Moreover, passenger revenues inched up 3.3% from the second-quarter 2019 reading. Cargo revenues skyrocketed 94.6% from second-quarter 2019 actuals to $574 million. Revenues from other sources increased 14.2% from the second-quarter 2019 tally to $709 million.
Operating Results
Below, we present all comparisons (in % terms) with the second-quarter 2019 figures.
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) increased 20.8%. Total revenue per available seat mile (TRASM) rose 24.3% to 19.35 cents. On a consolidated basis, average yield per revenue passenger mile was up 19.8% to 19.94 cents.
Consolidated airline traffic, measured in revenue passenger miles, dropped 13.8%, while capacity, measured in available seat miles, fell 14.5%. Consolidated load factor (percentage of seat occupancy) inched up 0.7 percentage points to 86.7% as the traffic decline was less than the capacity contraction. Average aircraft fuel price per gallon jumped 93.5% to $4.18. Fuel gallons consumed were down 17.2%.
Adjusted operating expenses were flat at $7,275 million. Operating expenses (on a reported basis) increased 13.1% to $11,234 million. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expenses, profit-sharing and special charges ascended 17%.
United Airlines exited the second quarter with cash and cash equivalents of $16,885 million compared with $18,283 million at the end of 2021. Long-term debt at the end of the reported quarter was $29,175 million compared with $30,361 million at the end of December 2021. UAL exited the quarter with total available liquidity of $22 billion.
Outlook
For the third quarter, United Airlines expects capacity to decline around 11% from the third-quarter level of 2019. The metric is anticipated to decline approximately 10% from the fourth-quarter 2019 actuals. Current-year capacity is likely to be 13% less than the 2019 actuals. TRASM is estimated to climb in the 24-26% band in the September quarter from the comparable period’s number in 2019. CASM, excluding fuel, third-party business expenses, profit-sharing and special charges, is anticipated to increase roughly 14% in the September and December quarters, respectively, from the corresponding 2019 levels. The metric is anticipated to increase approximately 16% and 5%, in 2022 and 2023, respectively, from the 2019 actuals.
Total operating revenues in the third quarter are likely to increase 11% from the September-quarter level of 2019. UAL forecasts the average aircraft fuel price per gallon to be $3.81 in the third quarter. Adjusted capital expenditures are predicted to be $5.2 billion for 2022. Adjusted operating margin is expected to be approximately 10% in the September quarter. UAL expects to be profitable for the full year. UAL is on track to achieve a pre-tax margin of approximately 9% in 2023 and about 14% in 2026.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 9.89% due to these changes.
VGM Scores
Currently, United has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, United has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
United is part of the Zacks Transportation - Airline industry. Over the past month, Delta Air Lines (DAL - Free Report) , a stock from the same industry, has gained 7.9%. The company reported its results for the quarter ended June 2022 more than a month ago.
Delta reported revenues of $13.82 billion in the last reported quarter, representing a year-over-year change of +94%. EPS of $1.44 for the same period compares with -$1.07 a year ago.
Delta is expected to post earnings of $1.54 per share for the current quarter, representing a year-over-year change of +413.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.4%.
Delta has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.