United Continental Earnings Miss in Q3


The largest U.S. airline – United Continental Holdings Inc. (UAL) – reported third quarter 2013 adjusted earnings of $1.51 per share, much lower than the Zacks Consensus Estimate of $1.64. Comparing year over year, the results improved from $1.35 per share. Consistent progress in customer service, enhancement of operations and aggressive promotional activities aided the company’s year-over-year growth.

Quarterly total revenue improved 3.2% year over year to $10.2 billion. The top line missed the Zacks Consensus Estimate of $10.3 billion. On an annualized basis, Other revenues increased 25.0% and passenger revenues increased 1.6%. Both increases were partially offset by Cargo revenues, which decreased 19.1%.

Operating Statistics

Airlines traffic, measured in revenue passenger miles, dropped 0.3% year over year to 55.9 billion. Capacity (or available seat miles) slid 1.1% year over year to 65.0 billion, while load factor (percentage of seats filled with passengers) improved 70 basis points year over year to 85.9%.

Consolidated passenger revenue per available seat miles (PRASM or unit revenue) increased 2.7% year over year supported by 9.0% growth in Atlantic PRASM, partially offset by a decrease of 9.4% in Pacific PRASM.

Operating Expenses

Total operating expenses, excluding special items, increased 0.1% year over year to $9.7 billion in the reported quarter. Consolidated unit cost or cost per available seat mile (CASM), excluding third-party business expense and special items, crept up 2.9% year over year.


At the end of the third quarter, the company had $6.7 billion in unrestricted liquidity, of which $1 billion was in revolving credit facilities. During the quarter, United Continental generated operating cash flow of approximately $237 million and spent approximately $598 million.

Other Airline Stocks

Archrival Delta Air Lines Inc.’s (DAL) third-quarter 2013 adjusted earnings of $1.41 surpassed the Zacks Consensus Estimate of $1.34 while low-cost carrier Southwest Airlines Co.’s (LUV) earnings of 34 cents where also ahead of the Zacks Consensus Estimate of 32 cents.

Our Take

United Continental – which operates with JetBlue Airways Corp. (JBLU) – currently holds a Zacks Rank #4 (Sell rating).

We remain concerned about fluctuating fuel prices, competitive threats, soft cargo demand, and a sluggish global economy. However, we believe that the company will perform better in the coming quarters from its renewed and upgraded jets, domestic and international expansion of network, customer-friendly services and promotional activities.

Read the Full Research Report on LUV
Read the Full Research Report on JBLU
Read the Full Research Report on DAL
Read the Full Research Report on UAL

Zacks Investment Research

View Comments (0)