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Why Is United (UAL) Up 10.7% Since Last Earnings Report?

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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 10.7% 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 its most recent earnings report in order to get a better handle on the important drivers.

Earnings Beat in Q3

United Airlines’ 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. 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 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 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%. UAL expects fourth-quarter earnings per share in the $2-$2.25 band. UAL is on track to achieve a pre-tax margin of approximately 9% in 2023.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 157.25% due to these changes.

VGM Scores

At this time, United has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.


Estimates have been 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 4.9%. The company reported its results for the quarter ended September 2022 more than a month ago.

Delta reported revenues of $13.98 billion in the last reported quarter, representing a year-over-year change of +52.7%. EPS of $1.51 for the same period compares with $0.30 a year ago.

Delta is expected to post earnings of $1.13 per share for the current quarter, representing a year-over-year change of +413.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.

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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