How Big Will United Airlines' (UAL) Fall be in Q2 Earnings?

United Airlines Holdings, Inc. UAL is slated to release second-quarter 2020 earnings numbers on Jul 21, after market close.

Similar to the first quarter, the company’s second-quarter performance is expected to reflect the negative impact from coronavirus. The adversity is likely to have been much greater in the second quarter with demand significantly below year-ago levels in the entire April-June period, compared with the first-quarter impact being limited mostly to March.

With passenger demand way below year-ago levels in the wake of coronavirus, United Airlines is anticipated to have suffered substantial loss of passenger revenues (accounting for more than 85% of the top line) in the to-be-reported quarter. The Zacks Consensus Estimate for second-quarter passenger revenues indicates a 93.1% drop from second-quarter 2019’s reported number. The carrier anticipates total revenues to decline 88% year over year for the second quarter. The Zacks Consensus Estimate for the same indicates an 89.4% plunge from year-ago reported revenues.

Due to significantly reduced demand, the carrier slashed capacity dramatically. The consensus mark for second-quarter capacity suggests an 87.5% decline from the year-ago reported figure. Additionally, the company expects to record a charge of approximately $300 million (related to voluntary-separation options offered to employees) for the second quarter.

With fuel expenses comprising a major chunk of airline expenditures, low fuel prices are expected to have aided the bottom line, partly offsetting the loss of passenger revenues. Notably, the consensus mark for average fuel price per gallon hints at a 49.5% fall from that reported in the year-ago period.

Additionally, the company anticipates cargo revenues to have increased substantially in the soon-to-be-reported quarter, backed by international cargo-only flying. For the second quarter, it expects cargo revenues to surge more than 30% year over year.

United Airlines Holdings Inc Price and EPS Surprise


United Airlines Holdings Inc Price and EPS Surprise

United Airlines Holdings Inc price-eps-surprise | United Airlines Holdings Inc Quote

Earnings Whispers

The proven Zacks model predicts an earnings beat for United Airlines in the second quarter of 2020. This is because the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: United Airlines has an Earnings ESP of +25.24% as the Most Accurate Estimate is pegged at a loss of $7.04 and the Zacks Consensus Estimate is pinned at a loss of $9.41. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: United Airlines carries a Zacks Rank #3.

Highlights of Q1 Earnings

In the last reported quarter, the company delivered a positive earnings surprise of 20.9% with narrower-than-expected loss. Although operating revenues decreased 16.8% year over year, it marginally beat the Zacks Consensus Estimate. The year-over-year plunge was due to 19% decrease in passenger revenues, thanks to coronavirus-led reduced travel demand.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider American Airlines Group Inc. AAL, Alaska Air Group, Inc. ALK and Air Lease Corporation AL as these stocks too possess the right combination of elements to beat on earnings this reporting cycle.

American Airlines has an Earnings ESP of +13.38% and a Zacks Rank of 3. The company will release second-quarter results on Jul 23.

Alaska Air has an Earnings ESP of +21.82% and a Zacks Rank #3. This company is also set to release second-quarter financial numbers on Jul 23.

Air Lease has an Earnings ESP of +23.32% and a Zacks Rank #3. The company will announce second-quarter earnings numbers on Aug 6.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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