United Airlines UAL is scheduled to report first quarter 2024 results on April 16, after market close.
UAL has an impressive earnings surprise history, having topped the Zacks Consensus Estimate in each of the previous four quarters, the average beat being 17.84%.
The Zacks Consensus Estimate for Q1 2024 earnings has been revised down 31.7% over the last 60 days.
With this background in mind, let’s examine the factors that likely influenced United Airlines’ performance in the quarter to be reported.
We expect high fuel costs to have dampened UAL’s bottom line performance in the March quarter. Although, oil price has dropped from the highs witnessed before, the same still remains high. For the first quarter of 2024, we expect the average fuel cost per gallon to be $3.38 per gallon, higher than the actual figure for the first quarter of 2023 of $3.33.
Additionally, UAL is burdened with expenses related to non-fuel unit costs. Non-fuel unit cost or cost per available seat mile (CASM: adjusted) is expected to increase in the mid-single digits from first quarter 2023 levels. High labor costs and low capacity lead to the increase. Our estimate suggests a 5.2% increase over last year’s levels.
Labor costs were likely high due to higher wages stemming from the pilot contract that was ratified in 2023. We expect wages and related costs to increase 28% in the first quarter of 2024 over the actuals of the first quarter of 2023.
A buoyant air travel demand in the holiday period likely boosted the top line in the quarter under review. We expect passenger revenues to rise by 9.4% from the previous year.
What Our Model Says
Our tested model does not definitively predict earnings for United Airlines this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the probability of an earnings beat. This is not the case here. You can discover the best stocks to buy or sell before they are reported with our Income ESP Filter.
UAL has an Earnings ESP of -11.41% and a Zacks Rank #3.
Q4 Highlights
United Airlines’ fourth-quarter 2023 earnings per share (excluding 19 cents of non-recurring items) of $2 topped the Zacks Consensus Estimate of $1.61 but declined 18.7% year over year.
Operating income of $13.63 billion beat the Zacks Consensus Estimate of $13.54 billion. The top line increased 9.9% year over year due to optimistic demand for air travel. This was driven by a 10.9% increase in passenger revenues (which accounted for 91.1% of the top line) to $12.42 billion. Almost 41,779 passengers traveled on UAL flights in the fourth quarter.
Stocks Worth Considering
Here are some stocks from the broader Zacks Transportation sector that investors can consider, as our model shows that these have the right combination of elements to beat their Q1 2024 earnings.
Union Pacific Corporation UNP has an Earnings ESP of +2.36% and a Zacks Rank #3. UNP is scheduled to report first quarter 2024 earnings on April 25. You can see the complete list of today’s Zacks #1 Rank stocks here.
We expect UNP’s cost-cutting efforts to boost earnings from the first quarter of 2024. The Zacks Consensus Estimate for quarterly earnings increased 0.8% to $2.53 per share over the last 30 days. UNP has topped the Zacks Consensus Estimate for earnings in three of the previous four quarters and missed once, the average pace is 1.41%.
Forwarders International of Washington EXPD has an Earnings ESP of +0.92% and a Zacks Rank #3. EXPD is scheduled to report first quarter 2024 earnings on May 7. Lackluster volumes (with respect to air cargo tonnage and ocean container) due to weakening demand and lower rates likely hurt EXPD’s performance in the quarter to be reported. .
The Zacks Consensus Estimate for first quarter earnings has been revised 3.54% down over the last 60 days. EXPD has topped the Zacks Consensus Estimate for earnings in just one of the previous four quarters and missed three times, the average miss being 3.37%.
Stay informed about upcoming earnings announcements with the Zacks Earnings Calendar.
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United Airlines Holdings Inc (UAL): Free Analysis Report
Union Pacific Corporation (UNP): Free Analysis Report
Expeditors International of Washington, Inc. (EXPD): Free Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.