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Why Is United (UAL) Down 4.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for United Airlines (UAL). Shares have lost about 4.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is United due for a breakout? 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.

Earnings Beat at United Airlines in Q4

United Airlines' fourth-quarter 2019 earnings earnings (excluding 14 cents from non-recurring items) of $2.67 per share surpassed the Zacks Consensus Estimate of $2.64. Moreover, the bottom line improved 10.8% year over year, mainly on lower fuel costs.

Operating revenues of $10,888 million increased 3.8% year over year and also marginally beat the Zacks Consensus Estimate of $10,886.2 million. Higher passenger revenues drove the top line.

Passenger revenues, accounting for bulk (91.2%) of the top line, rose 3.9% year over year. However, cargo revenues representing 2.9% of the top line declined 5.4%. Revenues from other sources contributed to the remainder.

Operating Results

Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) inched up 0.8% year over year to 13.98 cents. Total revenue per available seat mile increased 0.7% year over year to 15.33 cents. On a consolidated basis, average yield per revenue passenger mile ascended 1% from the year-ago quarter.

During the quarter under review, consolidated airline traffic, measured in revenue passenger miles, climbed 2.9% year over year. Capacity (or available seat miles) also expanded 3.1%. Consolidated load factor (percentage of seat occupancy) deteriorated 20 basis points to 82.5% as capacity expansion outweighed traffic growth. Meanwhile, average fuel price per gallon (on a consolidated basis) decreased 8.7% year over year to $2.1.

Total adjusted operating expenses increased 5.9% year over year to $7,477 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 was up 2.7% year over year. However, total unit costs slipped 1.3% year over year.

United Airlines exited the fourth quarter with cash and cash equivalents of $2,762 million compared with $1,694 million at 2018 end. Long-term debt at the end of the reported quarter was $13,145 million compared with $12,215 million at December 2018 end. Furthermore, the carrier bought back shares worth $216 million in the October-December period at an average price of $88.95 per share. During 2019 it repurchased shares worth $1.6 billion.

Annual Results

The company’s strong 2019 performance despite headwinds, such as the prolonged MAX groundings, government shutdown and poor weather conditions, can be gauged from the fact that it achieved its 2020 adjusted earnings per share target of $11-$13 in 2019 itself. For 2019, the company’s earnings of $12.05 per share beat the Zacks Consensus Estimate of $12.04. Total revenues of $43.26 billion also marginally outpaced the Zacks Consensus Estimate of $43.25 billion. While the bottom line surged 32% year over year, the top line improved 4.7%.

Q1 Outlook

For the first quarter of 2020, United Airlines anticipates PRASM to either remain flat year over year or increase up to 2%. Average fuel price per gallon is estimated in the range of $2.04-$2.14. Additionally, effective income tax rate is projected between 22% and 24%. The company’s earnings per share guidance for the first quarter is encouraging. Adjusted earnings per share are expected between 75 cents and $1.25.

2020 Outlook

Adjusted earnings per share are reiterated between $11 and $13. The mid-point, $12, of the guided range falls below the Zacks Consensus Estimate of $12.04. Capital expenditures are predicted to be $7 billion in 2020. Moreover, effective income tax rate is estimated in the range of 22-24%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 19.83% 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 C. However, 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 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.

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