^{Source: Predictions based on analysts’ consensus from Visible Alpha}

United Airlines (UAL) Financial Results: Analysis

United Airlines Holdings Inc. (UAL), among the world’s top three airlines by revenue, topped analyst expectations for profit and revenue for Q3 FY 2022 on strong travel demand following the COVID-related slowdown and despite macroeconomic headwinds. It’s stock rose in after-hours trading.

United’s adjusted earnings per share (EPS), excluding certain items, came in at $2.81 compared with -$1.02 for the prior-year quarter, significantly beating estimates. Revenue climbed by nearly two-thirds year-over-year (YOY) to $12.9 billion, also exceeding predictions. Passenger revenue growth drove these gains, while cargo revenue declined modestly.

United topped analyst expectations thanks to rebounding travel demand and even as the airline industry more broadly faces numerous headwinds. Accelerating inflation, rising ticket prices, and a cooling economy caused rival Delta Air Lines Inc. (DAL) to miss expectations when it reported quarterly results last week. United said the strong growth in travel demand has outweighed broader economic pressures as consumers worry about a looming recession.

UAL Load Factor

United’s load factor climbed sharply to 87.3%, the highest level in several years and solidly beating analyst expectations. Load factors are key metrics because the cost of sending an aircraft into flight is relatively the same whether 50 or 100 paying passengers are aboard. That gives airlines an incentive to fill as many seats as possible. Higher load factors mean an airline’s fixed costs are spread across a greater number of passengers, making the airline more profitable.

United Outlook and Stock Performance

United did not provide detailed forward outlook in its earnings release. It did say that it expects travel demand to continue to overcome downward macroeconomic pressures into Q4, with adjusted operating margin to top 2019 levels for the first time. United also expects that hybrid work setups will lead to a surge in leisure travel and that supply chain issues will linger.

United shares were up by 7.4% as of 4:44 p.m. New York time after the earnings release. Overall, United stock has returned -21.0% in the past year, below the S&P’s -17.1%.

United Airlines’ next earnings report (for Q4 FY 2022) is expected to be released on Jan. 17, 2023.