Hot Airline stock to watch: United Airlines Holdings Inc (NASDAQ: UAL)

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United Airlines Holdings Inc (NASDAQ: UAL) stock rose over 1.5% on 22nd January, 2020 (as of 9:42 am GMT-5; Source: Google finance) after the company posted better than expected earnings for the fourth quarter of FY 19. United had earned $641 million, in the quarter, as compared to $461 million, in the year-ago quarter. The stock fell on fear that a virus outbreak in China could affect travel between the U.S. and Asia, which is a key market for the airline. Even before the outbreak, a closely watched measure of revenue per seat was falling on United’s flights to and from Asia. Further, the company has committed $40 million toward a new investment initiative focused on accelerating the development of sustainable aviation fuels and other decarbonization technologies.

Meanwhile, U.S. airlines are enjoying solid demand for travel that has allowed them to sell more high-priced seats and amenities while limiting price hikes for average fares. United has been expanding by adding flights from its U.S. hubs such as Denver, Houston and San Francisco to smaller cities. United had added passenger-carrying capacity despite the loss of its Max jets, and revenue rose about twice as fast as operating expenses. There, labor costs grew 6%, but United’s fuel spending fell more than 5% as fuel prices fell from the same period in 2018.

Passenger revenue per mile for each seat, which is an indication of pricing power, rose nearly 1%, in line with United’s forecast of three months ago. The airline predicted that same figure would be flat to up 2% in the January-through-March quarter. Consolidated fourth quarter CASM, excluding special charges, third party business expenses, fuel and profit sharing, rose 2.7 percent year-over-year.

UAL in the fourth quarter of FY 19 has reported the adjusted earnings per share of $2.67, beating the analysts’ estimates for the adjusted earnings per share of $2.65, according to analysts polled by FactSet. The company had reported the adjusted revenue of $10.9 billion in the fourth quarter of FY 19, beating the analysts’ estimates for revenue of $10.9 billion.

Additionally, the company had repurchased $216 million of its common shares in the fourth quarter of 2019, at an average purchase price of $88.95 per share, which brought the share repurchases for full year 2019 to $1.6 billion.

United forecast adjusted earnings to be in the range of 75 cents to $1.25 per share in the first quarter while the analysts are expecting 72 cents per share.

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