United Air expects Q1 net profit to more than double estimates

Bloomberg

United Airlines Holdings Inc. said its first-quarter profit will be more than double analysts’ estimates, boosting shares as continued supply constraints across the industry combine with robust demand that shows no sign of slowing.
Adjusted earnings will be 50 cents to $1 a share in the period, the carrier said in a statement while also detailing fourth-quarter results. That compares with a 22-cent average of analysts’ estimates compiled by Bloomberg. Revenue will climb 50% year over year, the airline said.
The outlook underscores the strength in demand that industry leaders say is proving resistant to economic worries and despite high fares due to constrained flying capacity. United has also pointed to the rise in hybrid work arrangements during the pandemic, which have changed leisure-travel habits and filled the void during some traditionally slower periods for airlines.
The carrier also expects first-quarter flying capacity to increase about 20% from a year earlier. Non-fuel unit costs, including expected expenses from new labour contracts, will fall as much as 4% year over year.
The Chicago-based airline reported fourth-quarter adjusted profit of $2.46 a share, topping Wall Street’s estimate of $2.12. Revenue of $12.4 billion compared with expectations for $12.2 billion. Unit revenue, a gauge of demand and fares, rose 25.8% from 2019, the
airline said.
United said it was only moderately affected by severe winter storms last month and was able to recover quickly in part because of past investments the airline has made in technology.
“We’ve got a big head start, and we’re now poised to accelerate in 2023,” Chief Executive Officer Scott Kirby said.
Yield, or average fare per mile, climbed 20.8% from 2019, while non-fuel costs for each seat flown a mile, a measure of efficiency, rose 11% over the period.
“The beat was most attributed to yield strength throughout the quarter,” Helane Becker, a Cowen Inc. analyst, said in a note of fourth-quarter results.
A group of 11 US carriers should report a combined fourth-quarter pretax profit of $2.8 billion and revenue of $52.3 billion, up 12% from 2019’s fourth quarter, according to Michael Linenberg, a Deutsche Bank analyst. Delta Air Lines Inc. reported better-than expected fourth-quarter results on Jan. 13, but the company’s shares fell after it predicted higher costs this quarter. American Airlines Group Inc. is scheduled to report on Jan. 26.
For the full year, United said per-share earnings will be $10 to $12, compared to an average estimate of $6.64 from analysts. The airline reiterated its outlook for a 9% pre-tax margin in 2023. It plans $8.5 billion in capital spending this year.