According to the news report by CNBC, United Continental Holdings Inc., the parent company of United Airlines, saw its shares jump up after it reported higher profit and revenue that Wall Street expectations for Quarter 4. The airlines company also posted a strong forecast for growth in earnings in 2019.
United’s shares went up by as much as 6% in pre-market trading on Wednesday.
United’s revenue is measured by how much each seat makes per mile flown and the cost of airfare. Based on this, the company’s revenues went up by 5% during the fourth quarter as compared to the same time a year ago. This percentage jump in revenues was on the higher side of the guidance the airlines had forecast.
The cost per available seat mile went up 7% for the fourth quarter year on year. United stated that it was adding seats at a faster pace than either Delta Air Lines or American Airlines, but that it had filled most of its seats and that too at higher prices.
The carrier company also said that every region it operated in saw a growth in revenues, including domestic revenues, which grew the fastest at 12%.
United reported that revenue in the fourth quarter of 2018 was at $10.9 billion, a figure that beat the Wall Street expectation of $10.39 billion.
The company’s net income, however, dropped 20% vis-à-vis the same time last year, and was at $462 million. This was because of rising costs. In fact, United said that the carrier’s fuel expenses were 27% higher than the same time a year ago.
Adjusted pre-tax margins for the company increased by 7.8% as compared to the 6.9% increase United experienced one year ago. The company stated that its load factor had gone up by 82.7%, which was a 100-bps increase.
United’s earnings report was released on Tuesday evening, and it represented a strong turnaround for the company.
Ironically, one year ago, the Chief Executive Officer of the company Oscar Munez was struggling to convince investors that United’s plans to expand by 6% over the course of the year would be beneficial for the company. During the earnings call, Munez stated that United delivered on the promises that it had made despite the strong headwinds the carrier faced due to increasing fuel costs.
A year later, United beat all earnings estimates and stated that it was planning to expand its capacity by another 6% in the first quarter of 2019.
In terms of forecasts, the airlines company stated that it was expecting its first quarter revenue to range from staying flat to going up by about 3% as compared to the same time last year. The modest growth forecast was due to the ongoing partial shutdown of the US government, which had impacted the entire industry.
The airliner also said that it was expecting to deliver adjusted earnings of $1 per share. The market analyst consensus on this metric was $0.84 per share.
United said that its pre-share adjusted earnings for the fourth quarter were at $2.41. The market consensus was $2.04, lower than what the airlines company forecast now.
The company also said that it was expecting to see adjusted earnings in the range of $10 to $12 per share in 2019. This guidance was in line with market analysts’ expectations, which pegs the company’s adjusted earnings at $10.98 per share.
According to The Washington Post, the company also stated that its Q4 profits fell by 20% due to increasingly expensive fuel and labor. However, total revenue was up by 11% for the quarter.