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United Airlines Soared after It Reaffirmed Its Earnings Outlook


May. 22 2019, Published 8:51 a.m. ET

Reaffirmed earnings outlook

Shares of United Airlines (UAL) closed up 1.5% on May 21 after the company reaffirmed its earnings outlook for 2019. In a regulatory filing on May 21, the company said that it still expects its 2019 adjusted EPS to come in between $10 and $12.

The airline’s 2019 earnings expectations reflect YoY (year-over-year) growth in the range of 9%–31%. Wall Street analysts’ earnings estimate for the current year stands at $11.07 per share. The latest outlook update suggests that the company expects to continue to benefit from its strategy of adding more flights, efficient cost management, and investment in customer service.

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The company didn’t provide any updates on the other guidance it gave during an investor update it released on April 16. At that time, UAL had projected that it would increase seat capacity by 4%–5% in 2019. It expects its ex-fuel CASM (cost per available seat mile) to remain flat YoY at 10.11 cents.

Second-quarter expectations

Apart from reaffirming its 2019 EPS outlook, UAL also reiterated its adjusted pretax margin projection for the second quarter. The company still expects its adjusted pretax margin to come in between 11% and 13% in the second quarter, reflecting a YoY improvement in the range of 60–260 basis points. Higher revenue, efficient cost management, and lower fuel costs are expected to drive its pretax margin.

During its April 16 investor update, UAL said it expected to increase seating capacity by 3.5%–4.5% in the quarter. The company expects its second-quarter passenger revenue per available seat mile to increase 0.5%–2.5% to 14.04–14.32 cents. UAL predicts that Easter falling in April will have a positive impact on its second-quarter top line results. However, its using larger planes on its 14 grounded Boeing 737 MAX fleet routes will likely increase its costs slightly.

For the quarter, the company expects its ex-fuel CASM to increase in the range of flat to 1%, which comes to 9.87–9.97 cents. It expects its fuel cost per gallon to be $2.13–$2.23 compared to $2.26 in the previous year’s quarter.

Analysts expect the company to report EPS of $4.04 in the second quarter, a YoY rise of 25%. Analysts’ earnings expectations for UAL’s peers Delta Air Lines (DAL), Southwest Airlines (LUV), and American Airlines (AAL) suggest YoY rises of 22.4%, 6.5%, and 3.1%, respectively.

To gain exposure to US airline stocks, you can invest in the US Global Jets ETF (JETS), which tracks the performances of airlines, aircraft manufacturers, and airport and terminal services stocks. The ETF has returned 6.5% this year so far.


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