Post Earnings Coverage as United Airlines Q3 Revenue Beat Estimates Despite Dip

LONDON, UK / ACCESSWIRE / October 19, 2016 / Active Wall St. announces its post-earnings coverage on United Continental Holdings, Inc. (NYSE: UAL). The company released its financial results for the third quarter fiscal 2016 (Q3 FY16) on October 17, 2016. The Chicago, Illinois-based company's total operating revenue fell 3.8%; however it beat market consensus estimates. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

In Q3 FY16, United Airlines total operating revenue fell to $9.91 billion from $10.316 billion recorded at the end of Q3 FY15. However, total operating revenue numbers for Q3 FY16 beat market consensus estimates of $9.88 billion. During the period, the consolidated passenger revenue per available seat mile (PRASM) also decreased 5.8% y-o-y, while consolidated yield declined 5.7% y-o-y. The decline in PRASM was primarily driven by strong U.S. dollar, lower surcharges, reductions from energy-related corporate travel, and declining yields.

The company's net income came in at $965 million, or $3.01 per diluted share in Q3 FY16 compared to net income of $4.82 billion, or $12.82 per diluted share, in the prior year's comparable quarter. Excluding special items, net income for Q3 FY16 declined to $997 million, or $3.11 per diluted share, from $1.70 billion, or $4.53 per diluted share, in the year ago quarter. However, the adjusted net income for the reported period outperformed market consensus estimates of $3.05 per diluted share.

Oscar Munoz, Chief Executive Officer of United Airlines stated:

"We delivered another very good quarter, demonstrating the progress United continues to make at improving our customer experience, which included our best third quarter on-time performance in company history. As we execute our strategy to build the world's best airline, we will remain intensely focused on engaging our employees, running a great operation and improving our financial performance."

Operational Metrics

In the quarter ended on September 30, 2016, United Airlines' operating income declined to $1.62 billion, or 16.4% of total operating revenues, from $1.90 billion, or 18.4% of total operating revenues, in Q3 FY15.

In the reported quarter, the company generated $1.51 billion of income before income taxes compared to $1.61 billion in the same quarter of last year. Additionally, pre-tax margin for Q3 FY16 came in at 15.2% compared to 15.6% in Q3 FY15.

The airlines served 38.65 million customers during the reported quarter, which was 3.2% higher than 37.46 million recorded in the year ago period.

For the quarter, passenger load factor was 85.5% versus 85.6% in prior year's quarter.

Revenue Segmentation

United Airlines' Total Passenger revenue for Q3 FY16 was $8.60 billion compared to $8.96 billion reported in Q3 FY15. The company's Mainline Passenger revenue fell 3.3% y-o-y in Q3 FY16 to $7.02 billion from $7.25 billion in Q3 FY15. Furthermore, Regional Passenger revenue declined 7.0% y-o-y to $1.59 billion.

During the reported period, the Cargo revenue was down 4.7% on y-o-y basis to $224 million. Furthermore, other operating revenue for Q3 FY16 came in at $1.09 billion compared to $1.11 billion in the year ago comparable quarter.

Cash Matters and Balance Sheet

During the three months ended September 30, 2016, United Airlines' cash flow from operations was $1.14 billion, while the company generated $459 million of non-GAAP free cash flow during the reported quarter. Additionally, the company spent $689 million as GAAP capital expenditures during Q3 FY16.

Earnings Guidance

In its outlook for Q4 FY16, United Airlines anticipates consolidated PRASM to be in the range of 11.85¢/ASM to 12.11¢/ASM. The company's management forecasts a Cargo and Other Revenue in the range of $1.24 billion to $1.34 billion for the upcoming quarter and adjusted pre-tax margin is estimated to lie between 5.0% and 7.0% in Q4 FY16.

For full year FY16, the company forecasts consolidated PRASM in the range of 12.26 ¢/ASM and 12.32 ¢/ASM and adjusted pre-tax margin is estimated to lie between 11.2% and 11.6% in FY16.

Stock Performance

At the closing bell, on Tuesday, October 18, 2016, United Continental Holdings' stock climbed 1.23%, ending the trading session at $53.68. A total volume of 11.3 million shares were traded at the end of the day, which was higher than the 3-month average volume of 4.55 million shares. In the last one month and previous three months, shares of the company have advanced 5.34% and 11.14%, respectively. Shares of the company have a PE ratio of 5.72 and currently have a market cap of $17.47 billion.

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SOURCE: Active Wall Street