United Airlines is in a “very good position” to meet its flat cost per available seat mile (CASM) expenses goal for the year after reporting strong 1Q earnings, according to analysts at Deutsche Bank.
The investment house analysts said that a better March quarter, strong international demand, and improving unit costs its supportive of “substantial” EPS growth following the release of United’s results.
The firm reported an adjusted net loss of $207 million, or $0.63 per share, versus the $0.73 per share expected by the Street.
But its 2Q outlook excited investors and sent shares higher after the bell on Tuesday.
The US carrier said it expects a profit of $3.50 to $4 a share in the second quarter, which is above consensus estimates of $3.65 a share, according to Refinitiv data.
Deutsche Bank went a step further, noting that the underlying fuel price assumption of $2.80 to $3 “appears to be conservative” given that the fuel curve for April, May, and June is currently around $2.40 per gallon.
Analysts noted that United is using the fuel curve from a week ago and jet prices have dropped since then, particularly for the NY Harbor benchmark.
“For (the June quarter), United is projecting total revenue growth of 14% to 16% year-over-year which is in line with the mid-teen guide the company has reiterated several times throughout the quarter,” analysts noted.
“The company indicated that demand remains strong, especially international which is growing twice as fast as domestic (and we believe this is supported by the $2.6 billion surge in the company's air traffic liability quarter-over-quarter). And CASM-ex flat to up 2% on 18.5a% more capacity growth (year-over-year) puts the company in a very good position to achieve its flat CASM-ex goal for the year.”
Shares of United gained 7.5% on Wednesday in New York to close at $46.27.
Contact Angela at angela@proactiveinvestors.com
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