United Airlines’ Q4 EPS Are Expected to Jump ~43%



Fourth-quarter expectations

United Airlines, the wholly-owned subsidiary of United Continental Holdings (UAL), is scheduled to report its fourth-quarter earnings results on January 15. The third-largest US air carrier has an impressive record of beating earnings estimates. It has surpassed Wall Street analysts’ earnings estimates in ten of the last 11 quarters, with an average surprise of 4.5%.

It seems that the airline will continue its trend of reporting better-than-expected bottom line results and witness strong quarterly earnings growth in the fourth quarter. United Continental registered robust double-digit earnings growth in all of the first three quarters of 2018.

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Analysts expect a 42.9% YoY (year-over-year) increase in United Airlines’ fourth-quarter EPS to $2.00 on a 9.8% rise in revenue. Strong top line growth along with a lower tax rate and reduced outstanding shares due to the company’s aggressive share buyback program are expected to drive its fourth-quarter earnings.

Furthermore, since crude oil prices fell drastically during the fourth quarter, analysts expect United Continental’s profitability to improve significantly in the quarter. UAL was the only company among major US air carriers that registered an increase in its pretax profit despite a 36.5% rise in its fuel cost per gallon.

The company’s tax rate is anticipated to fall over 41% to 20.8% in the fourth quarter from 35.3% in the previous year’s quarter, mainly due to the enactment of the Tax Cuts and Jobs Act. The company’s number of outstanding shares is expected to fall 6.7% YoY to 272.21 million from 291.80 million.

Full-year projection

Analysts expect United’s 2018 EPS to jump 28.8% YoY to $8.71 on 9.1% higher revenue, reduced fuel costs, a lower tax rate, and a reduced number of outstanding shares.

On October 16, considering its strong travel demand and its commercial and asset utilization initiatives, United raised the lower end of its 2018 earnings guidance. The company now expects its 2018 adjusted EPS to be in the range of $8.00–$8.75 compared to the $7.25–$8.75 it forecast earlier. The company’s latest updated earnings guidance range depicts YoY growth of 18%–29%.

Analysts’ 2018 EPS projections for major airlines (JETS) Delta Air Lines (DAL), Southwest Airlines (LUV), and Spirit Airlines (SAVE) are $5.58, $4.15, and $4.36, respectively, which would reflect rises of 13.2%, 18.6%, and 30.9%, respectively, YoY.


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