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United Airlines (UAL) to Post Q4 Earnings: What's in Store?

United Airlines Holdings Inc UAL is slated to release fourth-quarter 2019 results on Jan 21, after the market closes.

The company boasts an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 14.7%.

Let’s see how things are shaping up for this earnings season.

Factors Likely at Play

With United Airlines having a substantial exposure to the Boeing 737 MAX jets, numerous flight cancellations (expected to have cancelled 5,100 flights in November and December) due to the extended grounding of the MAX aircraft is likely to have affected the carrier’s top line in the fourth quarter.

Additionally, rising non-fuel unit costs might have hurt the bottom line as has been the case over the last few quarters. The Zacks Consensus Estimate for cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit sharing and special charges implies a 3.5% increase from the year-ago reported figure. The company also anticipates adjusted non-fuel unit costs to have risen nearly 3.5% in the fourth quarter.

However, modest fuel prices (as fuel expenses comprise a major chunk of airline expenditures) are likely to have boosted earnings in the quarter, thereby partly offsetting the adversity from escalating non-fuel unit costs. For instance, the Zacks Consensus Estimate for average fuel price per gallon suggests a 10.4% decline from the prior-year reported number. The airline anticipates average fuel price per gallon to have been between $1.99 and $2.09.

Moreover, strong air travel demand is expected to have driven passenger revenues, accounting for more than 90% of the top line. The consensus mark for passenger revenues indicates a 4.2% rise from that reported a year ago. Meanwhile, passenger revenue per available seat mile (passenger unit revenues or PRASM) is estimated to have either been flat or increased up to 2% in the soon-to-be-reported quarter, per the company.

United Airlines Holdings Inc Price and EPS Surprise


United Airlines Holdings Inc price-eps-surprise | United Airlines Holdings Inc Quote

Earnings Whispers

The proven Zacks model does not conclusively predict an earnings beat for United Airlines in the fourth quarter of 2019. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: United Airlines has an Earnings ESP of -2.05% as the Most Accurate Estimate is pegged at $2.59, lower than the Zacks Consensus Estimate of $2.65. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: United Airlines carries a Zacks Rank #3.

Highlights of Q3 Earnings

In the last reported quarter, the company delivered a positive earnings surprise of 3.3%. The bottom line also improved 33% year over year, primarily owing to lower fuel costs. Although operating revenues lagged the Zacks Consensus Estimate, it increased 3.4% year over year on the back of higher passenger revenues.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Azul S.A. AZUL, Copa Holdings, S.A. CPA and Canadian Pacific Railway Limited CP as these stocks possess the right combination of elements to come up with an earnings beat in their next releases.

Azul has an Earnings ESP of +13.33% and a Zacks Rank of 1. The company will release fourth-quarter earnings numbers on Mar 12.

Copa Holdings is a #3 Ranked stock and has an Earnings ESP of +3.33%.

Canadian Pacific has an Earnings ESP of +0.16% and a Zacks Rank of 3. The company will release fourth-quarter 2019 earnings numbers on Jan 29.

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