What's in Store for United Airlines in Q1 Earnings?

United Airlines UAL is scheduled to report first-quarter 2024 results on Apr 16, after market close.

UAL has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 17.84%.

The Zacks Consensus Estimate for first-quarter 2024 earnings has been revised 31.7% downward over the last 60 days.

Given this backdrop, let's examine the factors likely to have influenced United Airlines' performance in the to-be-reported quarter.

We expect high fuel costs to have dented UAL's bottom-line performance in the March quarter. Even though, oil price has come down from the highs witnessed earlier, the same still remains high. For first-quarter 2024, we expect the average fuel cost per gallon to be $3.38 per gallon, higher than the first-quarter 2023 actual figure of $3.33.

Additionally, UAL is burdened with expenses related to non-fuel unit costs. Non-fuel unit cost or cost per available seat mile (CASM: adjusted) is expected to increase in mid-single digits from first-quarter 2023 levels. High labor costs and low capacity are leading to the uptick. Our estimate hints at a 5.2% increase from the year-ago levels.

Labor costs are likely to have been high due to higher wages arising from the contract with pilots that was ratified in 2023. We expect salaries and related costs to increase 28% in first-quarter 2024 from first-quarter 2023 actuals.

Buoyant air-travel demand in the holiday period is likely to have boosted the top line in the quarter under review. We expect passenger revenues to jump 9.4% from the prior year.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for United Airlines this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

UAL has an Earnings ESP of -11.41% and a Zacks Rank #3.

Q4 Highlights

United Airlines' fourth-quarter 2023 earnings per share (excluding 19 cents from non-recurring items) of $2 outpaced the Zacks Consensus Estimate of $1.61 but declined 18.7% year over year.
Operating revenues of $13.63 billion beat the Zacks Consensus Estimate of $13.54 billion. The top line increased 9.9% year over year due to upbeat air-travel demand. This was driven by a 10.9% rise in passenger revenues (which accounted for 91.1% of the top line) to $12.42 bllion. Almost 41,779 passengers traveled on UAL flights in the fourth quarter.

Stocks to Consider

Here are a few stocks from the broader Zacks Transportation sector that investors may consider, as our model shows that these have the right combination of elements to beat on their first-quarter 2024 earnings.

Union Pacific Corporation UNP has an Earnings ESP of +2.36% and a Zacks Rank #3. UNP is scheduled to report first-quarter 2024 earnings on Apr 25.

We expect UNP's cost-cutting efforts to boost first-quarter 2024 earnings performance. The Zacks Consensus Estimate for quarterly earnings has increased 0.8% to $2.53 per share over the last 30 days. UNP has surpassed the Zacks Consensus Estimate for earnings in three of the preceding four quarters and missed once, the average beat being 1.41%.

Expeditors International of Washington EXPD has an Earnings ESP of +0.92% and a Zacks Rank #3. EXPD is scheduled to report first-quarter 2024 earnings on May 7. Lackluster volumes (with respect to air-freight tonnage and ocean container) due to weakening demand and falling rates are likely to have hurt EXPD's performance in the to-be-reported quarter.

The Zacks Consensus Estimate for first-quarter earnings has been revised 3.54% downward over the last 60 days. EXPD has surpassed the Zacks Consensus Estimate for earnings in only one of the preceding four quarters and missed thrice, the average miss being 3.37%.

To read this article on Zacks.com click here.