United Airlines posted a solid Q1 beat, but the headline numbers weren’t enough to distract from a sharp fuel-cost warning that rattled the full-year outlook.
United Airlines Holdings, Inc., UAL
Revenue came in at $14.61 billion, up 10.5% year-over-year and ahead of the $14.19 billion analysts had expected. EPS hit $1.19, beating the $1.08 consensus. On the surface, a clean result.
But fuel is the story here.
CEO Scott Kirby sent a memo to employees before earnings, stress-testing a scenario where oil hits $175 per barrel. At that level, United estimated up to $11 billion in additional annual fuel costs. That’s not a baseline forecast — it’s a worst-case — but it set the tone.
Full-year EPS guidance was pulled wide, from a previous $12–$14 range down to $7–$11. That midpoint implies roughly a 10% drop year-over-year. Q2 guidance came in at $1–$2, assuming fuel at around $4.30 per gallon.
Management also said fares may need to rise as much as 15–20% to offset fuel costs, and announced capacity cuts targeting off-peak flying and specific routes.
The unit economics tell a more nuanced story. Total Revenue per Available Seat Mile (TRASM) grew 6.9% year-over-year in Q1, and Passenger Revenue per Available Seat Mile (PRASM) rose 7.4%. Both metrics point to firm demand and intact pricing power.
The challenge is timing. Because many Q2 tickets were already sold before fuel prices jumped, United expects to pass through only 40–50% of fuel costs this quarter. That improves to 70–80% in Q3, and 85–100% in Q4. The pass-through gets better — it just takes time.
CASM-ex, which strips out fuel, rose roughly 6% in Q1 after two flat quarters. That’s a flag worth watching, suggesting some operational cost creep beyond just fuel.
United generated $9.5 billion in cash from operations over the past 12 months. Its debt-to-assets ratio dropped from 54% to 35% in that same period. That’s better than American Airlines at 58%, though still behind Delta and Southwest.
Despite the guidance cut, the forward earnings multiple sits at 10.2x — cheaper than Delta and Southwest, which trade closer to 12.7x.
Caprock Group LLC increased its UAL position by 49.4% in Q4, bringing its stake to 39,921 shares worth around $4.46 million. Institutional investors hold 69.69% of the stock overall.
On the analyst side, BMO raised its price target to $130 with an outperform rating. Goldman raised its target to $129. Morgan Stanley has a $150 target with an overweight rating. The average across 17 analysts sits at $132.71.
UAL opened at $91.25 on Friday. The 52-week range runs from $65.66 to $119.21.
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