United Witnessed A Decline In Q2’16 Earnings, Despite Substantial Fuel Cost Savings
United Continental (NYSE:UAL) released its June 2016 financial results on 19th July 2016 [1], beating the consensus estimate for both revenue and Non-GAAP EPS. However, the company’s revenue took a beating compared to last year, falling a little over 5% year on year (y-o-y). The decline in revenue is attributable to the weak unit revenue in Latin America, Atlantic, and Pacific due to continued foreign currency headwinds. Moreover, the load factor declined by 40 basis points, highlighting United’s inability to optimize its existing capacity. This is in contrast to Delta, which in addition to increasing capacity, is also making strides to turn around its PRASM to positive by the end of the financial year.
In 2015, United’s tax bill had been low to negligible, owing to the utilization of income tax valuation allowance against the net operating losses it incurred. However, since the beginning of 2016, the carrier has been expending a substantial amount in income tax. Continuing this trend, the airline saw its tax bill increase in the June quarter. In addition to taxes, the higher salary costs and impairment charges related to Newark Liberty International Airport slots also weighed on the airline’s bottom line. As a result, United’s profits plunged 51%, despite lower fuel expense (-32% y-o-y) and the airline’s share buyback program.
- Spurred By Stellar Earnings, Can United Airlines Holdings Stock Extend Its Run?
- United Airlines Holdings Stock Looks Set For A Come Back
- Down 13% Last Week, Can United Airlines Holdings Stock Bounce Back?
- Is United Airlines Stock On The Move?
- Company Of The Day: United Airlines
- Will United Airlines Stock Rise After Recent Correction?
Have more questions about United Continental (NYSE:UAL)? See the links below:
- Currency Headwinds To Offset United Continental’s Fuel Cost Savings For 1Q’16
- How Will United’s Equity Value Be Impacted If The Crude Oil Prices Rebound To $100 Per Barrel By 2018?
- How Will United’s Equity Value Be Impacted If The Crude Oil Prices Average At $50 Per Barrel In 2018?
- How Will United’s Revenue And EBITDA Grow Over The Next Five Years?
- How Important Is United’s International Division For Its Overall Equity Value?
- What Is United’s Fundamental Value Based On 2016 Estimated Numbers?
- Why We Think United Continental Is Worth $65 Per Share?
- What Drove United’s Revenue And EBITDA Growth Over The Last Five Years?
- How Has United’s Revenue And EBITDA Composition Changed Over The Last Five Years?
- What Is United Continental’s Revenue And EBITDA Breakdown?
- How Has United Continental Utilized Its Cash Flows Over The Last Three Years?
- How Have Plummeting Crude Oil Prices Impacted United Continental’s Operating Margin?
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for United Continental
View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
Notes:- United announces June quarter profit, united.com, July 2016 [↩]