Can United Airlines (UAL) Retain Beat Streak In Q2 Earnings?

United Airlines Holdings Inc (NASDAQ:UAL) is slated to release second-quarter 2019 results on Jul 16, after the market closes.

In the last reported quarter, the company delivered a positive earnings surprise of 22.3%. Moreover, the bottom line showed a massive year-over-year improvement, mainly on lower fuel costs. Operating revenues also surpassed the Zacks Consensus Estimate and increased year over year on higher passenger revenues. Notably, the company boasts an impressive earnings history, having outperformed the Zacks Consensus Estimate in three of the last four quarters, the average beat being 14%.

Let’s see, how things shape up for this earnings season.

What the Zacks Model Unveils

Our proven model shows that United Airlines is likely to beat on earnings in the second quarter as well as it comprises the perfect combination of the following two key ingredients:

Earnings ESP: United Airlines has an Earnings ESP of +7.93% as the Most Accurate Estimate is pegged at $4.37 per share, above the Zacks Consensus Estimate of $4.04. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: United Airlines sports a Zacks Rank #1 (Strong Buy), which increases the predictive power of ESP. Notably, stocks with a favorable Zacks Rank of 1, 2 (Buy) or 3 (Hold) along with a positive ESP have significantly higher chances of beating estimates.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Factors Likely at Play

With demand for air travel being consistently strong, United Airlines is anticipated to generate healthy passenger revenues, which in turn, should boost the top line. The Zacks Consensus Estimate for second-quarter passenger revenues stands at $10,447 million, higher than $9880 million reported in the year-ago period.

Additionally, the consensus mark for passenger revenue per available seat mile is pegged at 14.20 cents, above 13.97 cents reported in the year-ago quarter. The company expects passenger unit revenues to grow in the 0.5-2.5% range. Meanwhile, adjusted pre-tax margin for the period is anticipated between 11% and 13%.

Fuel prices were at modest levels for the most part of the second quarter. With fuel comprising a major chunk of airline expenditures, the low oil prices should benefit the company’s bottom line. Evidently, the consensus estimate for average fuel price per gallon stands at $2.19, lower than $2.26 reported in the second quarter of 2018. The company projects the same between $2.13 and $2.23 for the quarter to be reported.

However, the long-standing Boeing (NYSE:BA) 737 Max groundings might impact the company’s upcoming results. Although the company does not own any Max 8 jet (the one involved in the crash), it has 14 Max 9s, which are a tad longer than the MAX 8 versions. During the April-June period, the carrier had to cancel numerous flights due to the ongoing groundings. This may have induced some loss of revenues for the company.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider Alaska Air Group, Inc. (NYSE:ALK) , Canadian Pacific Railway Limited (NYSE:CP) and Canadian National Railway Company (NYSE:CNI) as these stocks too possess the right mix of elements to beat on earnings in their next releases.

Alaska Air Group has an Earnings ESP of +1.50% and a Zacks Rank #3. The company will report second-quarter 2019 results on Jul 25.

Canadian Pacific has an Earnings ESP of +0.89% and a Zacks Rank #2. This company is scheduled to announce second-quarter 2019 financial numbers on Jul 16. You can see the complete list of today’s Zacks #1 Rank stocks here.

Canadian National has an Earnings ESP of +1.12% and a Zacks Rank of 3. The company will post second-quarter 2019 earnings numbers on Jul 23.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>