United Continental Holdings Inc. (UAL) – one of the leading U.S. airlines – reported lackluster performance in the first quarter of 2014 owing to a severe winter weather. The company posted a loss of $1.33 cents per share, narrower than the Zacks Consensus Estimate of a loss of $1.38.
Comparing year over year, the results deteriorated considerably from a loss of 98 cents per share. A frigid winter widened the loss to the tune of $200.0 million. Shareholders have reacted negatively to the news as the stock is trading in red on NYSE early in the session.
Quarterly total revenue dropped 0.3% year over year to $8.70 billion, which was also below the Zacks Consensus Estimate of $8.75 billion. On a year-over-year basis, Passenger and Cargo revenues decreased 2.3% and 7.9% respectively while Other revenues moved up 18.0%.
Operating Statistics
Airline traffic, measured in revenue passenger miles, dropped 0.35% year over year to 46.4 billion. Capacity (or available seat miles) fell 0.27% year over year to 57.2 billion, while load factor (percentage of seats filled with passengers) remained flat year over year at 81.1%.
Consolidated passenger revenue per available seat miles (PRASM, or unit revenue) deteriorated 2.0% year over year owing to weather-related cancellations. First quarter PRASM in Pacific, Atlantic and Latin America saw year-over-year decreases of 6.3%, 3.4% and 1.7% respectively.
Operating Expenses
Total operating expenses, excluding fuel, profit sharing, special charges and third party expenses rose 2.8% year over year to $5.88 billion in the reported quarter. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expense and special items, crept up 3.1% year over year.
Liquidity
As of Mar 31, 2014, the company had $6.0 billion in unrestricted liquidity, of which $1.0 billion was in revolving credit facilities. In the first quarter, United Continental’s cash flow from operating activities was $694.0 million, while gross capital expenditure was $737.0 million.
Other Airline Stocks
Delta Air Lines Inc. (DAL) reported first-quarter results on Apr 23, with adjusted earnings of 33 cents coming ahead of the Zacks Consensus Estimate of 29 cents. The bottom line leaped 230.0% from the year-ago adjusted profit of 10 cents.
Two other carriers, Alaska Airlines Group Inc. (ALK) and Spirit Airlines Inc. (SAVE) will release first quarter financial results on April 25 and 29, respectively.
Our Analysis
United Continental currently holds a Zacks Rank #3, implying a Hold rating.
Going forward, the carrier plans to cut costs by spending less on fuel and optimizing distribution channels, and thereafter enhance productivity. Further, the company is also making solid progress in expanding its on-board products and services in both domestic and international fleet to perk up its ancillary revenue contributions. However, a weak cargo market, soft performance by the Asia-Pacific region and stiff competition remain the near-term impediments for the company.
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