Why United Airlines stock is higher this week
Despite rising costs, delivery delays and the grounding of Boeing aircraft, the airline continues to stay on track with its full-year guidance.
stock of united airlines (UAL 5.50%) It was up 23% for the week ending Friday morning. The move comes after the company released a well-received first-quarter earnings report and numerous Wall Street analyst upgrades.
relief rally
Investors in United Airlines have been concerned about the prospect of a slowdown in revenue growth due to relatively high interest rates that are weighing on consumer spending, rising industry costs and the negative impact of delayed aircraft deliveries. boeing Boeing MAX 9 aircraft grounded after accident Alaska Airlines January flight.
But United Airlines’ results helped allay those concerns. Management expected total revenue per available seat mile (TRASM) to be flat for the quarter, but up 0.6% year-over-year. Premium revenue increased 14% year over year.
Meanwhile, adjusted cost per available seat mile (CASM-ex) increased 4.7% compared to mid-single-digit growth guidance.
Unfortunately, the grounding of the MAX 9 aircraft had a $200 million negative impact on revenue, and management adjusted its aircraft plans due to delayed deliveries of Boeing aircraft. “With these fleet changes, we now expect total capital expenditures for 2024 to be approximately $6.5 billion, down from $9 billion at the beginning of the year,” CFO Michael Leskinen said in the earnings call.
What it means for investors
Delivery issues and the MAX 9 grounding kept United Airlines from its full-year guidance of $9 to $11 in adjusted diluted earnings per share. Moreover, the delivery delay could be a blessing in disguise for the industry as it will limit capacity growth in 2024, allay fears of overcapacity and put pressure on TRASM.
Image source: Getty Images.
On the other hand, Leskinen also mentioned the pressure on CASM-ex due to delivery delays, as the company is structured for higher capacity. Overall, the results are a net positive (though we’ll keep an eye on CASM the next time it reports earnings), and like Delta Air Lines, United Airlines is on track to generate significant profits in 2024.
Isamaha does not have any positions in these stocks. The Motley Fool recommends Alaska Air Group and Delta Air Lines. The Motley Fool has a disclosure policy.
