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United Airlines (UAL) Rides on Air Travel Demand, Costs Ail

United Airlines Holdings, Inc. UAL is seeing a steady recovery in domestic and leisure air-travel demand. Recovery in business travel demand has also picked up pace. With this, the company expects to be profitable in the third quarter, like the second quarter of 2022.

On the back of this robust demand environment, UAL provides bullish revenue guidance for third-quarter 2022. For the third quarter, United Airlines anticipates total operating revenues to grow almost 12% from the September quarter of 2019, higher than the prior expected growth rate of about 11% (provided during the company’s second-quarter 2022 earnings release on Jul 20).

The company expects total revenue per available seat mile (TRASM) to increase by around 25% in the third quarter from the comparable period’s number in 2019 (previous view: up in the 24-26% band). Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expenses, profit-sharing and special charges, is anticipated to increase roughly 16% in the September quarter from the corresponding quarter of 2019 (previous view: 16-17%). The adjusted operating margin is expected to be approximately 10.5% in the September quarter, higher than the prior guidance of 10%.

The positivity surrounding the stock is evident from the northward movement of the Zacks Consensus Estimate for third-quarter earnings, which has improved 21.9% over the past 90 days.

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On the flip side, rising fuel costs pose a threat to United Airlines’ bottom line. Oil price is moving north primarily because Russia invaded Ukraine. The carrier reported an average aircraft fuel price per gallon of $4.18 in the second quarter, up 93.5% year over year. UAL forecasts the average aircraft fuel price per gallon to be $3.83 in the third quarter, much higher than the reported figure in third-quarter 2021.

Zacks Rank and Stocks to Consider

Currently, United Airlines carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader Zacks Transportation sector are ZTO Express ZTO, Air Lease Corporation AL and Teekay Tankers Ltd. TNK, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ZTO Express has an expected earnings growth rate of 22.9% for the current year. ZTO delivered a trailing four-quarter earnings surprise of 8.9%, on average.

The Zacks Consensus Estimate for ZTO’s current-year earnings has improved 4.4% over the past 90 days. Shares of ZTO have lost 19.6% over the past year.

Air Lease has a long-term expected growth rate of 16.9%. AL delivered a trailing four-quarter earnings surprise of 29.2%, on average.

Shares of AL have lost 20.8% over the past year.

Teekay Tankers has an expected earnings growth rate of 172.86% for the current year. TNK delivered a trailing four-quarter earnings surprise of 46.1%, on average. Teekay Tankers has a long-term expected growth rate of 3%.

The Zacks Consensus Estimate for TNK’s current-year earnings has improved more than 100% over the past 90 days. Shares of TNK have soared 88.3% over the past year.


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United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
Air Lease Corporation (AL) : Free Stock Analysis Report
 
Teekay Tankers Ltd. (TNK) : Free Stock Analysis Report
 
ZTO Express Cayman Inc. (ZTO) : Free Stock Analysis Report
 
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