United Continental Holdings Inc. (UAL) – one of the leading U.S. airline companies – reported higher-than-expected earnings in the fourth quarter of 2014. The company posted adjusted earnings of $1.20 per share, ahead of the Zacks Consensus Estimate of $1.14. The earnings beat caused the company’s shares to rise in early trading.
Including special items, the company reported earnings of 7 cents, well below the comparable figure of 37 cents a year-ago.
Quarterly total revenue declined 0.2% year over year to $9.3 billion, but was in line with the Zacks Consensus Estimate. On a year-over-year basis, passenger revenues increased 1.3% while cargo revenues rose 18.2% mainly buoyed by higher volumes. Other revenues dropped 14.3% from the year-earlier quarter mainly affected by termination of a deal to sell fuel to a third party.
Consolidated passenger revenue per available seat miles (PRASM or unit revenue) rose 0.4% year over year.
Total operating expenses, excluding fuel, profit sharing, special charges and third party expenses, declined 4.7% year over year. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expenses and special items, increased 1.2% year over year to 9.73 cents. Fuel costs declined 14.7% during the quarter (including realized hedging losses).
As of Dec 31, 2014, United Continental Holdings had $5.7 billion of unrestricted liquidity, out of which $1.35 billion was invested in revolving credit facilities. In the fourth quarter, United Continental spent nearly $100 million in share repurchases. The company's return on invested capital was 12.9% in full year 2014.
The company expects its performance to improve in 2015 compared to 2014. CASM in 2015 on a consolidated basis, excluding fuel and third-party business expense, is expected to be approximately flat. In the first quarter of 2015, the company projects pre-tax margin (excluding special items) in the range of 5% to 7%.
Peer Releases
American Airlines Group (AAL) will release its fourth quarter earnings result on January 27, before the commencement of trading. We expect the company to report lower-than-expected earnings in the quarter. The company, though carrying a Zacks Rank #1 (Strong Buy), possesses a negative Earnings ESP. According to our model, a stock needs to have both a positive earnings ESP and a Zacks Rank #1, 2 (Buy) or 3 (Hold) for us to confidently predict an earnings beat.
Zacks Rank
United Continental Holdings currently holds a Zacks Rank #1. Equally well ranked stocks in the industry include Alaska Air Group, Inc. (ALK) and Delta Air Lines, Inc. (DAL).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment