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United Airlines (UAL) Up on Q3 Earnings Beat, Rosy Q4 EPS View
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United Airlines’ (UAL - Free Report) third-quarter 2022 earnings (excluding 5 cents from non-recurring items) of $2.81 per share beat the Zacks Consensus Estimate of $2.21 and our estimate of $2.17.
Upbeat air-travel demand aided results. As a result, shares gained traction in after-hours trading on Oct 18. In the year-ago quarter, UAL incurred a loss of $1.02 per share when air-travel demand was not as buoyant as in the current scenario. The third quarter of 2022 was the second consecutive profitable quarter at UAL since the onset of the pandemic.
Operating revenues of $12,877 million beat the Zacks Consensus Estimate of $12,709.5 million and our estimates of $12, 631.6 million. UAL’s revenues increased more than 66% 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 13.2% from third-quarter 2019 (pre-coronavirus) levels.
The massive year-over-year increase in the top line was driven by more than a 75% rise in passenger revenues (accounting for 90.5% of the top line) to $11,653 million. Moreover, passenger revenues increased 11.2% from the third-quarter 2019 reading. Nearly 39 million passengers traveled on UAL flights in the September quarter. This implied that passenger volume was 90% of the pre-pandemic volume. Cargo revenues skyrocketed 76.6% from third-quarter 2019 actuals to $498 million. Revenues from other sources increased 17.7% from the third-quarter 2019 tally to $726 million.
Management believes that air-travel demand and pricing trends will remain strong in the December quarter as well. UAL expects adjusted operating margin in the December quarter to be around 10%, rising above the 2019 levels (pre-coronavirus) for the first time. Our estimate for fourth-quarter 2022 adjusted operating margin is currently pegged at 8.9%. Driven by solid demand, management expects total revenue per available seat mile (TRASM) to increase in the 24%-25% band in the December quarter from fourth-quarter 2019 actuals.
Other Details of Q3
Below, we present all comparisons (in % terms) with the third-quarter 2019 figures unless otherwise stated.
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) increased 23.3%. Total revenue per available seat mile (TRASM) rose 25.5% to 19.02 cents. Average yield per revenue passenger mile was up 21.6% to 19.72 cents.
Consolidated airline traffic, measured in revenue passenger miles, dropped 8.6%, while capacity, measured in available seat miles, fell 9.8%. Consolidated load factor (percentage of seat occupancy) inched up 1.2 percentage points to 87.3% as the traffic decline was less than the capacity contraction. Our estimates for third-quarter 2022 consolidated load factor are currently pegged at 82%.
Average aircraft fuel price per gallon jumped 88.6% to $3.81, in line with our estimates. Fuel gallons consumed were down 13.1% from third-quarter 2019 actuals.
Adjusted operating expenses increased 3.2% to $7,596 million. Operating expenses (on a reported basis) increased 15.3% to $11,419 million. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expenses, profit-sharing and special charges, ascended 14.5% to 11.22 cents.
United Airlines, currently carrying a Zacks Rank #2 (Buy), exited the third quarter with cash and cash equivalents of $11,258 million compared with $18,283 million at the end of 2021. Long-term debt at the end of the reported quarter was $28,490 million compared with $30,361 million at the end of December 2021. UAL exited the quarter with total available liquidity of $20.4 billion.
For the fourth quarter of 2022, United Airlines expects capacity to decline around 9-10% from the fourth-quarter level of 2019. Current-year capacity is likely to be 13% less than the 2019 actuals. CASM, excluding fuel, third-party business expenses, profit-sharing and special charges, is anticipated to increase 11-12% in the September quarter from the corresponding 2019 level. The metric is anticipated to increase approximately 15% from the 2019 actuals.
UAL forecasts the average aircraft fuel price per gallon to be $3.61 in the fourth quarter. Adjusted capital expenditures are predicted to be $4.7 billion for 2022. Adjusted operating margin is expected to be approximately 10% in the September quarter. UAL expects fourth-quarter earnings per share in the $2-$2.25 band. The Zacks Consensus Estimate for fourth-quarter earnings is currently pegged at 83 cents.
UAL is on track to achieve a pre-tax margin of approximately 9% in 2023.
Sectorial Snapshots
Within the broader Transportation sector, Delta Air Lines (DAL - Free Report) and J.B. Hunt Transport Services (JBHT - Free Report) recently reported third-quarter 2022 results.
Delta Air Lines’ third-quarter 2022 earnings (excluding 42 cents from non-recurring items) of $1.51 per share fell short of the Zacks Consensus Estimate of $1.56. Escalated operating expenses induced the earnings miss.
Multiple flight cancellations and booking weakness due to Hurricane Ian also hurt results. Delta reported earnings of 30 cents per share a year ago, dull in comparison to the current scenario, as air-travel demand was not so buoyant then.
J.B. Hunt’searnings of $2.57 per share surpassed the Zacks Consensus Estimate of $2.45 and improved 36.7% year over year. Total operating revenues of $3,838.3 million also outperformed the Zacks Consensus Estimate of $3,803.4 million.
The top line at JBHT jumped 22.1% year over year on the back of an impressive performance at the Intermodal and Dedicated Contract Services segments. Total operating revenues, excluding fuel surcharges, rose 12.4% year over year.
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United Airlines (UAL) Up on Q3 Earnings Beat, Rosy Q4 EPS View
United Airlines’ (UAL - Free Report) third-quarter 2022 earnings (excluding 5 cents from non-recurring items) of $2.81 per share beat the Zacks Consensus Estimate of $2.21 and our estimate of $2.17.
Upbeat air-travel demand aided results. As a result, shares gained traction in after-hours trading on Oct 18. In the year-ago quarter, UAL incurred a loss of $1.02 per share when air-travel demand was not as buoyant as in the current scenario. The third quarter of 2022 was the second consecutive profitable quarter at UAL since the onset of the pandemic.
Operating revenues of $12,877 million beat the Zacks Consensus Estimate of $12,709.5 million and our estimates of $12, 631.6 million. UAL’s revenues increased more than 66% 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 13.2% from third-quarter 2019 (pre-coronavirus) levels.
The massive year-over-year increase in the top line was driven by more than a 75% rise in passenger revenues (accounting for 90.5% of the top line) to $11,653 million. Moreover, passenger revenues increased 11.2% from the third-quarter 2019 reading. Nearly 39 million passengers traveled on UAL flights in the September quarter. This implied that passenger volume was 90% of the pre-pandemic volume. Cargo revenues skyrocketed 76.6% from third-quarter 2019 actuals to $498 million. Revenues from other sources increased 17.7% from the third-quarter 2019 tally to $726 million.
Management believes that air-travel demand and pricing trends will remain strong in the December quarter as well. UAL expects adjusted operating margin in the December quarter to be around 10%, rising above the 2019 levels (pre-coronavirus) for the first time. Our estimate for fourth-quarter 2022 adjusted operating margin is currently pegged at 8.9%. Driven by solid demand, management expects total revenue per available seat mile (TRASM) to increase in the 24%-25% band in the December quarter from fourth-quarter 2019 actuals.
Other Details of Q3
Below, we present all comparisons (in % terms) with the third-quarter 2019 figures unless otherwise stated.
Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) increased 23.3%. Total revenue per available seat mile (TRASM) rose 25.5% to 19.02 cents. Average yield per revenue passenger mile was up 21.6% to 19.72 cents.
Consolidated airline traffic, measured in revenue passenger miles, dropped 8.6%, while capacity, measured in available seat miles, fell 9.8%. Consolidated load factor (percentage of seat occupancy) inched up 1.2 percentage points to 87.3% as the traffic decline was less than the capacity contraction. Our estimates for third-quarter 2022 consolidated load factor are currently pegged at 82%.
Average aircraft fuel price per gallon jumped 88.6% to $3.81, in line with our estimates. Fuel gallons consumed were down 13.1% from third-quarter 2019 actuals.
Adjusted operating expenses increased 3.2% to $7,596 million. Operating expenses (on a reported basis) increased 15.3% to $11,419 million. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expenses, profit-sharing and special charges, ascended 14.5% to 11.22 cents.
United Airlines, currently carrying a Zacks Rank #2 (Buy), exited the third quarter with cash and cash equivalents of $11,258 million compared with $18,283 million at the end of 2021. Long-term debt at the end of the reported quarter was $28,490 million compared with $30,361 million at the end of December 2021. UAL exited the quarter with total available liquidity of $20.4 billion.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Outlook
For the fourth quarter of 2022, United Airlines expects capacity to decline around 9-10% from the fourth-quarter level of 2019. Current-year capacity is likely to be 13% less than the 2019 actuals. CASM, excluding fuel, third-party business expenses, profit-sharing and special charges, is anticipated to increase 11-12% in the September quarter from the corresponding 2019 level. The metric is anticipated to increase approximately 15% from the 2019 actuals.
UAL forecasts the average aircraft fuel price per gallon to be $3.61 in the fourth quarter. Adjusted capital expenditures are predicted to be $4.7 billion for 2022. Adjusted operating margin is expected to be approximately 10% in the September quarter. UAL expects fourth-quarter earnings per share in the $2-$2.25 band. The Zacks Consensus Estimate for fourth-quarter earnings is currently pegged at 83 cents.
UAL is on track to achieve a pre-tax margin of approximately 9% in 2023.
Sectorial Snapshots
Within the broader Transportation sector, Delta Air Lines (DAL - Free Report) and J.B. Hunt Transport Services (JBHT - Free Report) recently reported third-quarter 2022 results.
Delta Air Lines’ third-quarter 2022 earnings (excluding 42 cents from non-recurring items) of $1.51 per share fell short of the Zacks Consensus Estimate of $1.56. Escalated operating expenses induced the earnings miss.
Multiple flight cancellations and booking weakness due to Hurricane Ian also hurt results. Delta reported earnings of 30 cents per share a year ago, dull in comparison to the current scenario, as air-travel demand was not so buoyant then.
J.B. Hunt’s earnings of $2.57 per share surpassed the Zacks Consensus Estimate of $2.45 and improved 36.7% year over year. Total operating revenues of $3,838.3 million also outperformed the Zacks Consensus Estimate of $3,803.4 million.
The top line at JBHT jumped 22.1% year over year on the back of an impressive performance at the Intermodal and Dedicated Contract Services segments. Total operating revenues, excluding fuel surcharges, rose 12.4% year over year.