United Continental (UAL) reported earnings on Tue 16 Oct 18 (a/h)

** charts after earnings **

 

United Continental misses by $0.01, reports revs in-line; guides FY18 EPS above consensus

• Reports Q3 (Sep) earnings of $3.06 per share, $0.01 worse than the S&P Capital IQ Consensus of $3.07; revenues rose 11.2% year/year to $11 bln vs the $10.95 bln S&P Capital IQ Consensus. Tropical storms across the system are estimated to have reduced diluted earnings per share by ~$0.07. Third-quarter diluted earnings per share increased 42%. The company recaptured ~100% of its year-over-year fuel expense increase in the third quarter.
• Consolidated passenger revenue per available seat mile (PRASM) increased 6.1 percent year-over-year, above the high end of the company's third-quarter 2018 guidance range of up 4 percent to 6 percent. Consolidated unit cost per available seat mile (CASM) increased 6.4 percent year-over-year. Consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, decreased 0.4 percent year-over-year.
• Sees Q4 capacity +5-6%, PRASM +3-5%, adj. unit costs down 0-1%, pre-tax margin 5-7%
• Co issues upside guidance for FY18, raises EPS to $8.00-8.75 from $7.25-8.75 vs. $8.16 S&P Capital IQ Consensus. The company currently expects to recapture ~90% of the estimated $2.5 billion year-over year increase in full-year 2018 fuel expense.
• "Our growth plan has been essential to our success, and we're more confident than ever we'll achieve the ambitious adjusted earnings per share1 target of $11 to $13 we laid out for 2020."

United Continental CEO Oscar Munoz on CNBC; stock leading airlines higher following earnings, Deutsche Bank upgrades the big 3; CSX adds to transport tailwind 

United Continental CEO Oscar Munoz on CNBC:

• Overall plan is coming together
• Corporate travel outlook is strong; leisure market has been good outside of Hawaii
• Not seeing any negative impact on demand related to China
• WiFi initiative/offering can evolve to a free product over time
• Growing EPS, cash flow, industry doing better

UAL +5.6% after raising FY18 EPS guidance and guiding for continued strong Q4 unit revenue.

 United Continental on call 

• Expects to return to margin expansion in 2019 (will be close in Q4); confident in unit cost target
• Will give formal 2019 capacity outlook in January, building that from the bottom up 
• Decisions predicated on working towards $11-13 EPS target for 2020
• Stock represents a compelling long-term investment