United Continental Holdings Inc (UAL) Earnings Preview 2014: Airline Will Swing To Profit After Strong December

on January 22 2014 7:11 AM
  • United Airline 2012 by shutterstock
    Things are looking up for United Airlines. Shutterstock.com
  • United Airlines
    An United Airlines airliner taxis past the wreckage of Asiana Airlines. United are expected to report good earnings for the fourth quarter in 2013. REUTERS/Stephen Lam
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United Continental Holdings Inc. (NYSE:UAL), one of the world’s biggest airlines, will swing to a fourth-quarter profit primarily due to a surge in business over December and weak results a year ago.

The Chicago-based company, which reports before the market opens on Thursday, is expected to report net income of $181.41 million, compared with a loss of $190 million in the year-earlier quarter, while earnings per share will increase to 49 cents per share from a loss of $1.87 per share over the same period, according to a Thomson Reuters survey of Wall Street analysts.

Revenue is projected to rise 6.7 percent to $9.29 billion from $8.7 billion. Excluding one-time items, analysts expect earnings per share of 58 cents, compared with a loss of 58 cents in the fourth quarter of last year.

Of particular note is United’s December passenger revenue per available seat miles (PRASM, which rose between 11.5 percent and 12.5 percent, “greater than originally expected due to strong yields and traffic throughout the month," said a spokesperson for United.

The increase was due to winter storms that added about 2.5 points to the total gain. Cancellations increased the passenger revenue on flights that actually flew, meaning the same amount of passengers flew on fewer flights, raising the percentage figures.

Goldman Sachs Group (NYSE:GS) analysts expect United's PRASM to rise 3 percent year-on-year, supported by better-than-anticipated pricing in December, which rose by 12 percent year-on-year.

“After having underperformed the industry since September 2013, United’s adjusted passenger unit revenue (PRASM) growth of 10 percent y/y in December was largely in line,” Raymond James analysts noted. “However, this was well above our 3 percent estimate for December as we had not expected United’s PRASM growth to recover to industry levels until first quarter 2014. As a result, we are increasing our fourth-quarter 2013 EPS from 30 cents to 68 cents.”

The numbers are a major improvement from the disappointing fourth quarter in 2012 and a relief given the strong performance of Delta Air Lines Inc. (NYSE:DAL), which itself surpassed earnings estimates this quarter, and the expected strong performance of United’s other main rivals, American Airlines Group Inc. (NASDAQ:AAL) and Southwest Airlines Co. (NYSE:LUV), which will report on Tuesday, Jan. 28, and Thursday, Jan. 23, respectively.

The fourth-quarter outlook is a sign of improvement for United, which previous to the third quarter in 2013 had reported year-on-year earnings decline for nine straight quarters.  

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(Note: UAL Plane-in-flight by Shutterstock.com.)

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