United Continental Beats Q3 Earnings, Misses Revenues

United Continental Holdings Inc. (UAL) – one of the leading U.S. airlines – reported impressive performance in the third quarter of 2014. The company posted adjusted earnings of $2.75 per share, ahead of the Zacks Consensus Estimate of $2.70. Moreover, the reported earnings per share of $2.37 were substantially above 98 cents recorded in the comparable prior-year period.

Quarterly total revenue improved 3.3% year over year to $10,563 million, but was below the Zacks Consensus Estimate of $10,623 million. On a year-over-year basis, passenger revenues increased 3.9% while cargo revenues rose 19.1% mainly buoyed by higher volumes. Other revenues dropped 8.9% from the last-year quarter mainly affected by termination of a deal to sell fuel to a third party.

Operating Statistics

Airline traffic, measured in revenue passenger miles, spiked a mere 0.4% year over year to 56.1 billion while capacity (or available seat miles) grew 0.5% year over year to 65.4 billion, leading to a load factor (percentage of seats filled with passengers) of 85.8%, down 10 basis points.

Consolidated passenger revenue per available seat miles (PRASM or unit revenue) rose 3.9% year over year.

Operating Expenses

Total operating expenses, excluding fuel, profit sharing, special charges and third party expenses, declined 1.9% year over year. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expenses and special items, increased 1% year over year to 9.2 cents.

Liquidity

As of Sep 30, 2014, United Continental Holdings had $6.9 billion of unrestricted liquidity, out of which $1.35 billion was invested in revolving credit facilities. In the third quarter, United Continental’s cash flow from operating activities totaled $574 million, while gross capital expenditures stood at $493 million.

Peer Releases

Delta Air Lines Inc. (DAL) reported third-quarter 2014 adjusted earnings of $1.20 per share, beating the Zacks Consensus Estimate of $1.18, while Southwest Airline Co.’s (LUV) earnings of 55 cents also steered ahead of our estimate of 53 cents. Meanwhile, Alaska Air Group, Inc. (ALK) also reported impressive third-quarter 2014 financial numbers, wherein the reported earnings of $1.47 per share surpassed the Zacks Consensus Estimate of $1.41.

United Continental Holdings currently holds a Zacks Rank #1, implying a Strong Buy rating.