United Continental Records A Revenue Beat While Earnings Come In Line For 3Q

United Continental’s (NASDAQ:UAL) 3Q earnings came in at $3.06 per share, representing an increase of 37% on a year-on-year basis. The revenues came in at $11 billion for the quarter, which was higher than the consensus expectations. The company’s focus on mainline and premium customers led to a rise of 6.1% in the revenue per available seat mile during the quarter, indicates that the carrier’s strategy is working. However, the costs per available seat mile also increased by 6.4%, somewhat dampening the bottom-line growth.

We currently have a price estimate of $82 per share, that is lower than the market price. You can use our interactive dashboard, United’s Outlook For 2018, to modify key drivers and visualize their impact on the price estimate.

United continued to improve customer service throughout the quarter by adding new boarding technology at 1,000 boarding gates. This will ensure a quicker and more efficient boarding process, thereby reducing customer stress. United predicts the new technology will help in acquiring passengers/market share.

Furthermore, United’s continued focus on efficiency seems to be paying off, as customer load factor in the month of July, was the highest in the history of the company’s operations. This helped offset some of the extra fuel costs ($760 million), that the airline faced during the quarter.

United continued to focus on its mainline business and niche routes. During the quarter, it added 12 aircraft, 100 flights, and 10,000 seats to key holiday destinations, thereby increasing operational efficiency and incremental revenue. However, that did not prevent a decline in its profit margins, as crude prices soared. United’s net income was saved by a reduction in the tax rate.

The management has continued to reiterate the strategy to buy back stock as market valuations continue to be cheap (in their opinion). This should add further momentum to the stock price in the coming quarter.

In conclusion, the results were largely in line with the guidance that the management had provided, and what the market had expected.

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