On Wednesday, United Airlines ($UAL) unveiled its second-quarter financial results, drawing attention as they surpassed Wall Street's expectations. However, the airline's earnings outlook for the ongoing third quarter led to a mixed reception, as it fell short of analyst predictions. In the June quarter, United Airlines reported adjusted earnings per share (EPS) of $4.14, marking a decline from $5.03 reported during the same period last year.
Analysts had anticipated a normalized EPS of $3.93 according to Capital IQ consensus estimates. Operating revenue showcased a positive trend, increasing by 5.7% to reach $14.99 billion, surpassing the forecasted figure of $14.97 billion. Diving deeper into the revenue breakdown, passenger revenue rose by 5.2% to $13.68 billion year-over-year, a solid performance alongside a notable 14% increase in cargo revenue.
However, a critical metric—total revenue per available seat mile (TRASM), which allows for an assessment of airline efficiency—showed a slight decline, falling by 2.4% compared to the same quarter in 2023. Looking ahead, United Airlines has provided an update for investors, projecting adjusted earnings for the third quarter to be in the range of $2.75 to $3.25 per share.
This outlook contrasts with the market's expectation of EPS being around $3.38. Nevertheless, United upheld its full-year EPS forecast, eyeing a range between $9 and $11, even as market analysts estimated it to be at $9.76. Scott Kirby, Chief Executive of United Airlines, commented on the industry landscape, stating, "For nearly two years, the airline has been anticipating significant domestic capacity reductions recently announced by a variety of US airlines this summer and mid-August is an inflection point, with published schedule changes showing an approximately three-point decline in industry capacity growth rate.
We see multiple airlines have begun to cancel loss-making capacity." This remark reflects the ongoing challenges within the industry as airlines adapt to shifting demand and operational hurdles. As of the latest data, United Airlines stock is priced at $46.65, showing a decrease of $0.29, translating to a -0.62% change.
Investors will be keenly observing how these earnings and operational insights will influence United's market positioning moving forward, particularly in a competitive sector marked by unprecedented shifts and economic pressures..