United Airlines Q3 Earnings Expected To Decline

United Airlines (NASDAQ: UAL) will report its Q3 2024 results on Wednesday, October 16. We expect the company’s revenues to come in at $14.85 billion and earnings to be $3.15 per share, slightly ahead of the consensus estimates of $14.78 billion and $3.12, respectively. The company likely saw lower passenger yields and increased costs in Q3. See our interactive dashboard analysis on United Airlines’ FY 2024Q3 Earnings Preview for more details on United Airlines’ revenues and earnings for the quarter.

Trends To Watch Out For In Q3

United Airlines will likely continue to benefit from an increased capacity, while the occupancy and yields may trend lower than the levels seen in the prior-year quarter. Also, the company should continue to see higher non-fuel costs, primarily due to increased wages. The company’s PRASM (passenger revenue per available seat mile) is expected to see a low single-digit y-o-y decline to $16.80 in Q3. With a likely rise in overall costs, the company’s bottom line is expected to fall 14% to $3.15 on an adjusted basis.

How Did United Airlines Perform In Q2?

United Airlines’ revenue of $15 billion in Q2 was up 5.7% y-o-y. The company reported an 8.3% rise in available seat miles, while the PRASM was down 2.9%. The company saw its adjusted pre-tax margin fall to 12.1% in Q2’24 from 15.3% in the prior-year quarter. The company’s bottom line stood at $4.14 on an adjusted basis, versus $5.03 in Q2’23. It also reported a 3.8% y-o-y rise in average fuel cost per gallon. United Airlines expects its Q3 adjusted EPS to be in the range of $2.75 and $3.25.

What It Means For UAL Stock?

We think UAL stock has little room for growth. We estimate United Airlines’ Valuation to be $64 per share, reflecting less than 10% upside from its current levels of around $60. Our forecast is based on a 6x P/E multiple for UAL and expected earnings of $9.94 on a per-share and adjusted basis for the full year 2024. The company has guided its adjusted earnings per share to be in the range of $9.00 and $11.00.

With a slight beat expected in Q3, UAL stock may see higher levels next week. However, we would watch out for any revision in earnings estimates and the trends in average yields and occupancy, which may define the movement in its stock price in the near term.

Looking at UAL stock performance over a slightly longer term, the changes in its stock price have been far from consistent, despite annual returns being considerably less volatile than the S&P 500.  The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is also less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

While United Airlines stock looks like it has little room for growth, check out how other United Airlines Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 10/11/2024
[2] Cumulative total returns since the end of 2016

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