United Airlines Holdings Inc. late Tuesday reported fourth-quarter earnings that were well above Wall Street expectations, saying it managed well the severe winter-weather disruptions in late December, and offered an optimistic view of the current quarter and guidance for full-year 2023.
United $(UAL)$ managed through "one of the worst weather events in my career to get deliver for so many of our customers and get them home for the holidays," United Airlines Chief Executive Scott Kirby said.
U.S. airlines canceled or delayed thousands of flights in late December due to Winter Storm Elliott, with Southwest Airlines Co. $(LUV)$ the worst affected. Southwest told Wall Street to expect a fourth-quarter loss, adding that the cancelations are likely to cost about $825 million.
United's Kirby pinned the different outcome for his airline on "critical" investments in personnel and technology. "That's why we've got a big head start, and we're now poised to accelerate in 2023," the CEO said.
United earned $843 million, or $2.55 a share, in the fourth quarter, swinging from a loss of $646 million, or $1.99 a share, in the year-ago quarter. Adjusted for one-time items, United earned $2.46 a share.
Revenue rose to $12.40 billion from $8.2 billion a year ago.
Analysts polled by FactSet expected United to report adjusted earnings of $2.11 a share on revenue of $12.23 billion.
The stock rallied more than 3% in extended trading after ending the regular trading day down 0.9%. The airline has scheduled a conference call with analysts Wednesday at 10:30 a.m. Eastern
United guided for first-quarter adjusted EPS between 50 cents and $1, well above current FactSet consensus of 31 cents a share, and said it expects revenue to grow around 50% in the quarter.
For the full year, the airline called for adjusted EPS between $10 and $12, also significantly higher than FactSet consensus of $6.84 a share.
Delta Air Lines Inc. $(DAL)$ reported fourth-quarter earnings last week, also surprising analysts with better-than-expected numbers and keeping guidance for the year intact
American Airlines Group Inc. $(AAL)$, which reports quarterly earnings next Thursday before the bell, also reported an upbeat guidance last week.
United guided for capital expenditures of about $8.5 billion this year. That's ahead of consensus for about $8.2 billion, according to Third Bridge analyst Peter McNally.
"United is going to need more aircraft, and this is leading to outsized capital spending," McNally said. The airline began its investment program in mid-2021 and there's a "massive amount of spending" needed for 2023.
That is not without its risks, but "demand for air travel continues to grow," McNally said.
"In the near term, the biggest wildcard is what happens to business travel, which may have reached a short-term plateau," the analyst said.
United stock has gained 9% over the past 12 months. That contrasts with losses of around 14% for the S&P 500 index and of nearly 10% for the U.S. Global Jets ETF over that time.
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