United Airlines (UAL) Q4 earnings preview: Traffic growth might offset cost pressures

For United Airlines Holdings (NASDAQ: UAL), the final months of fiscal 2019 were marked by widespread flight disruptions caused by grounding of the 737 MAX fleet. The airline is scheduled to release fourth-quarter results on Tuesday at 4:15 pm ET. Experts are looking for earnings of $2.65 per share, which represents a 10% annual growth. Revenues are expected to grow 4% to $10.88 billion.

The positive earnings forecast mainly reflects the relatively low gasoline prices, which account for the lion’s share of the firm’s operating expenditure. Meanwhile, profitability might come under pressure from higher costs per unit, excluding fuel, which remained elevated in recent quarters.

Related: United Airlines Q3 2019 Earnings Call Transcript

It needs to be noted that crude prices were moderate last year – after falling sharply towards the end of 2018 – despite major supply cuts and production disruptions in the Middle East amid political tensions.

Disruption Woes

Like most of its peers in the aviation space, United Airlines has been at the receiving end of the Boeing 737 MAX crisis, which made the company cancel services extensively. It is likely to have a negative impact on revenues in the to-be-reported quarter. At the same time, the top-line is estimated to have gained from the steady growth in passenger traffic across the key markets.

Stock

United Airlines’ shares witnessed significant fluctuation in 2019, marked by an uptick mid-year that drove them up to an all-time high. On Friday, the stock traded broadly at the levels seen at the beginning of the year. It gained about 5% in the past twelve months.

Also read: Boeing (BA) 737 Max jets might return to skies soon

In the third quarter, an increase in passenger traffic pushed up revenues to $11.38 billion. Consequently, earnings rose by a third to $4.07 per share and topped the Street view. However, the top-line missed the estimates.

Aviation Sector

Earlier this week, Delta Air Lines (DAL) reported higher earnings and revenues for the fourth quarter, supported by lower fuel charges and an increase in passenger traffic. The results also exceeded analysts’ expectations. Among others, American Airlines (AAL) will be publishing results for its most recent quarter on January 23, before the opening bell.

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