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United (UAL) Up 7.3% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for United Airlines (UAL). Shares have added about 7.3% 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 at UAL in Q4

United Airlines  reported fourth-quarter 2023 fourth-quarter 2023 earnings per share (excluding 19 cents from non-recurring items) of $2.00, which outpaced the Zacks Consensus Estimate of $1.61 but declined 18.7% year over year.

Operating revenues of $13,626 million beat the Zacks Consensus Estimate of $13,546.8 million. The top line increased 9.9% year over year due to upbeat air-travel demand. This was driven by a 10.9% rise in passenger revenues (which accounted for 91.1% of the top line) to $12,421 million. Almost 41,779 passengers traveled on UAL flights in the fourth quarter.

Cargo revenues fell 14.8% year over year to $402 million. Revenues from other sources jumped 10.6% from the fourth quarter of 2022 to $803 million.

Other Details of Q4

Below, we present all comparisons (in % terms) with the fourth quarter of 2022 figures unless otherwise stated.

Consolidated passenger revenue per available seat mile (a key measure of unit revenues) decreased 1%. Total revenue per available seat mile dipped 2.8% to 18.49 cents. The average yield per revenue passenger mile remained flat at 19.72 cents.

Consolidated airline traffic, measured in revenue passenger miles, grew 10.8%. Capacity, measured in available seat miles, expanded 14.7%. Consolidated load factor (percentage of seat occupancy) contracted 2.9 percentage points to 82.3%.

Average aircraft fuel price per gallon fell 11.6% to $3.13. Fuel gallons consumed were up 13.1%. Operating expenses (on a reported basis) increased 14.6% to $12,628 million. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expenses, profit-sharing and special charges, increased 4.9% to 12.28 cents.

UAL exited the fourth quarter with cash and cash equivalents of $6,058 million compared with $7,478 million at the prior-quarter end. Long-term debt was $25,057 million compared with $25,932 million at the end of the prior quarter.

Outlook

For first-quarter 2024, UAL expects total revenue per available seat mile to stay flat year over year. Adjusted cost or operating expense per available seat mile (CASM-ex) is expected to be up in the mid-single digits.Adjusted loss per share is expected to lie between 85 and 35 cents.

For 2024, adjusted earnings per share are expected to lie between $9 and $11. Adjusted capital expenditures are expected to be around $9 billion.

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How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -364.73% due to these changes.

VGM Scores

Currently, United has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 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. 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 belongs to the Zacks Transportation - Airline industry. Another stock from the same industry, Delta Air Lines (DAL), has gained 6.8% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.

Delta reported revenues of $14.22 billion in the last reported quarter, representing a year-over-year change of +5.9%. EPS of $1.28 for the same period compares with $1.48 a year ago.

For the current quarter, Delta is expected to post earnings of $0.35 per share, indicating a change of +40% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.6% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Delta. Also, the stock has a VGM Score of B.

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