Shares in United Airlines (NASDAQ: UAL) rose 23% in the week ending Friday morning. The move comes after the company released a well-received first-quarter earnings report and a slew of Wall Street analyst upgrades.
Investors in United Airlines were concerned about the prospect of slowing revenue growth due to relatively high interest rates pressuring consumer spending, rising costs in the industry, and the negative impact of delayed airplane deliveries from Boeing and the grounding of Boeing MAX 9 airplanes following an incident on an Alaska Airlines flight in January.
However, United Airlines’ results helped to dispel these fears. Management had expected total revenue per available seat mile (TRASM) to be flat in the quarter, but it rose 0.6% year over year. Premium revenue rose 14% year over year.
Meanwhile, adjusted cost per available seat mile (CASM-ex) rose 4.7% compared to guidance for a mid-single-digit increase.
Unfortunately, the grounding of the MAX 9 fleet negatively impacted earnings by $200 million, and management adjusted its fleet plan due to delivery delays on Boeing aircraft. CFO Michael Leskinen said on the earnings call, “Due to these fleet changes, we now expect full-year 2024 total capital expenditures to be approximately $6.5 billion, down from $9 billion at the start of the year.”
The delivery issues and MAX 9 groundings haven’t caused United Airlines to deviate from its full-year guidance of $9 to $11 in adjusted diluted earnings per share. Moreover, the delivery delays may prove to be a blessing in disguise for the industry as they will restrict capacity growth in 2024, allaying fears of overcapacity rising and putting pressure on TRASM.
Image source: Getty Images.
On the other hand, Leskinen also spoke of the pressure on CASM-ex coming from the delivery delays because the company was structured for more capacity. All told, the results are a net positive (although keep an eye on CASM next time it reports earnings), and just like Delta Air Lines, United Airlines is on track to deliver substantial profits in 2024.
Before you buy stock in United Airlines, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and United Airlines wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 15, 2024
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Alaska Air Group and Delta Air Lines. The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
