Categories Analysis, Earnings

Thriving on strong traffic, United Continental to defy fuel woes in Q3

The airline industry has managed to come out unscathed from the rising fuel costs so far, thanks to the stable demand. It is speculated that the sector might witness a hike in passenger fares and luggage fees in the coming months if the uncertainties in the oil market persist.

United Continental (UAL) is scheduled to announce earnings for the third quarter Tuesday at 4:15 PM. The downtrend in United’s stock performance, after retreating from last month’s peak, has rendered Wall Street slightly cautions in the outlook on the firm, which is expected to report earnings of $3.05 per share for the third quarter.

The forecast represents a 37% increase compared to the third quarter of 2017. The estimate for revenues is $10.95 billion. Considering the airline’s impressive earnings history, most market watchers believe a beat is very much on the card.

The downtrend in stock performance after retreating from last month’s peak has rendered Wall Street slightly cautions

With the number of air travelers increasing consistently, passenger revenues are likely to register a stronger growth this time. Profitability will also be positively impacted by favorable effective tax rate from the tax reform rolled out by the government last year. Since fuel cost accounts for a major chunk of the operating expense, the bottom line will still be dragged by the ongoing oil rally to some extent.

For the June quarter, the Chicago, Illinois-based airline had reported earnings of $3.23 per share, beating estimates by a wide margin. Revenues increased about 8% annually to $10.78 billion and came in above expectations.

Recently, analysts at Deutsche Bank had revised down the rating on United to hold from a buy, while also lowering the price target, mainly to reflect the negative stock movement. Three other rating agencies also slashed the price target on the company ahead of the earnings report.

American Airlines (AAL), the largest passenger airline in the US, is slated to report third-quarter results on October 25 before the opening bell. Delta Airlines (DAL) last week reported double-digit earnings growth for the third quarter, supported by traffic growth.

United Continental shares gained 34% over the past twelve months and 16% since the beginning of the year. The stock, which hit an all-time high in Mid-September, has declined progressively since then.

United Airlines Q2 results top estimates amidst rising fuel costs

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