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United Airlines stock increases as earnings and the travel outlook for 2023 impress

United Airlines (UAL) shares soared higher on Wednesday as the airline posted better-than-expected fourth-quarter results.

As revenues increased by 51.4 percent from the prior year to $12.4 million and profit margins increased to 11.2%, United reported that adjusted earnings for the three months ended in December came in at $2.46 per share, much exceeding the $2.10 Street projection.

United Airlines Revenue

Regarding the upcoming fiscal year, United stated that it anticipates adjusted earnings to nearly quadruple, helped in part by the continued travel boom and a tighter rein on expenses, to between $10 and $12 per share, more than doubling the Refinitiv forecast of $6.54 per share, with revenue growth in the high teens.

Data from the Transportation Security Administration shows that from January 1 to January 16, approximately 32.57 million passengers were checked, a 30.3% increase from the same period in 2018 and 4.2% more than the pre-pandemic levels of 2019. Travel numbers are continuing to rise in the United States.

In pre-market trading, United Airlines shares were marked 2.70% higher to reflect an opening bell price of $52.58 a share, a move that would increase the stock’s gain over the past six months to about 33%.

In light of the ongoing increase in domestic travel and the easing of restrictions on U.S. travelers 

traveling to China, United’s larger rival American Airlines (AAL) – Get Free Report increased its forecast for the fourth quarter’s profit, predicting it will report adjusted earnings that are more than double its prior estimate.

With revenues of $12.3 billion, a nearly 30% increase over the same period last year, Delta Air Lines (DAL) – Get Free Report was the first of the major airlines to report December quarter profits last week. However, the company issued a warning that rising non-fuel costs, including recently agreed-upon 34% pay increases for pilots, would reduce its near-term profits.

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Worst Winter Storm

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United Airlines (UAL) shares soared higher on Wednesday as the airline posted better-than-expected fourth-quarter results.

United Airlines Holdings Inc. provided guidance for the whole year of 2023 and late on Tuesday revealed fourth-quarter earnings that were far higher than Wall Street expectations.

The company credited good management of the severe winter weather disruptions in late December.

Due to Winter Storm Elliott, thousands of flights were canceled or delayed by American airlines in late December, with Southwest Airlines Co. suffering the most. Southwest advised Wall Street to expect a fourth-quarter deficit, saying that the cancelations are likely to cost around $825 million.

United’s Kirby attributed the differing outcome for his company to important personnel and technological expenditures. The CEO explained That’s why we’ve got a significant head start, and we’re ready to accelerate in 2023.

This year, United projected capital spending of around $8.5 billion. According to Third Bridge analyst Peter McNally, that is higher than the consensus estimate of $8.2 billion.

McNally predicts that United will need additional aircraft, leading to a surplus of capital expenditures. Midway through 2021, the airline began its investment program. By 2023, substantial spending will be necessary.

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