United Airlines is expected to deliver impressive earnings, following the strong results posted by its rival, Delta Air Lines. The airline is well-positioned to benefit from robust summer demand and is likely to surpass its own estimated figures when it releases its financial report later today.
The entire sector has experienced a boost in confidence after Delta (ticker: DAL) achieved record-breaking revenue and profitability in the second quarter. In addition, the ongoing strong summer season, highlighted by a highly successful July Fourth weekend, has contributed to the positive outlook. Furthermore, the decline in fuel costs has played a significant role in driving up the stocks of airlines in recent weeks.
Analysts predict that United (Ticker: UAL) will announce earnings per share (EPS) of $4.04, exceeding the company’s initial guidance range of $3.50 to $4. They also anticipate revenue of $13.9 billion, according to FactSet estimates.
Investors and industry experts will be paying close attention to United’s full-year guidance, especially after Delta raised its earnings outlook for 2023 in its recent announcement.
J.P. Morgan analyst Jamie Baker commented on Delta’s earnings beat and guidance raise, noting how it has further bolstered confidence in major U.S. airlines, including United. Baker emphasized that the “Big 3” carriers (Delta, United, and American Airlines) continue to outperform low-cost airlines by a significant margin of approximately 30 percentage points so far in 2023.
Overall, there is a positive sentiment surrounding United Airlines’ upcoming earnings report, with investors anticipating strong performance fueled by favorable market conditions and the ongoing success of its rivals.
United’s Confidence vs Wall Street’s Expectations
Despite United’s confidence in its performance for the remainder of the year, there appears to be a disconnect between the company and Wall Street. While United is forecasting earnings per share (EPS) of $10 to $12 for the full year, analysts are expecting $9.75. However, there is a growing consensus among analysts, with the initial estimate of $6.42 at the beginning of the year now climbing.
Potential Gains for United
United’s stock has already experienced a significant increase of over 40% in 2023. If the company manages to close the gap even further, it could potentially enjoy more gains after announcing its earnings.
Third-Quarter Earnings Guidance
The upcoming third-quarter earnings guidance from United will provide insight into whether the sector’s hot summer can continue. Analysts are currently expecting earnings per share of $3.72, which will be a crucial number to keep in mind.
Focus on United’s Cost Guidance
The cost guidance provided by United will be closely watched, especially after the recent agreement reached with the union representing its pilots. While the airline had already factored in higher contracts in its cost guidance earlier this year, the agreement with the pilots’ union will increase pay rates by 34.5% to 40.2% over a four-year period, amounting to an estimated $10 billion in value, according to the Air Line Pilots Association (ALPA). Ratification by pilots is still required.
American Airlines’ Earnings Report
United’s earnings release after the market close on Wednesday will be followed by American Airlines (AAL), which is scheduled to announce its earnings before the market opens on Thursday. Analyst Helane Becker from TD Cowen anticipates that both management teams (United and American Airlines) will echo Delta’s comments about strong performance for international and premium products.
