How LikeFolio Data Spotted United Airlines’ Earnings Liftoff

BY ANDY SWAN

United Airlines (UAL) has made significant strides in the aviation sector – positioning itself as a leader through strategic international expansions, fleet enhancements, and a solid financial recovery since the pandemic.

In the lead-up to UAL’s earnings report yesterday, several factors indicated strong momentum for the company, despite broader industry challenges.

After clocking a 113% win on United last earnings season, we kicked off the first week of Earnings Season Pass with another bullish bet.

LikeFolio’s custom earnings algorithm assigned UAL a decidedly bullish Earnings Score of +62, tipping off our subscribers that the stock could be in for a surprise to the upside. That strong signal came with a Very Bullish trade recommendation – a strategy that can produce incredible gains, often 300% or more, when it hits. (And that’s in five days or less.)

We were right on the money.

UAL popped more than 11% today on a solid report – and the members who followed our lead are once again reaping the profits.

Here’s a look behind the curtain at the key metrics that helped us predict United’s earnings beat… and what our data might mean for its future prospects.

International Expansion Leading the Charge

United recently announced an aggressive expansion of its international itinerary, adding over 760 new flights weekly and introducing eight new destinations for the summer of 2024. This expansion underscores UAL’s long-term growth strategy, driven by a 35% larger international capacity than any other U.S. airline.

This is a bold move, especially in a sector heavily impacted by global travel disruptions over the past few years.

It’s important to note that this international push is tied to a much-needed fleet expansion from The Boeing Company (BA). Ongoing delays and strikes at Boeing have temporarily halted this process, which could potentially impact UAL’s ability to fully capitalize on its ambitious plans.

Prior Earnings and Financial Strength

We always look to the previous quarter (in this case, Q2) to see what we can learn – from both the results and the ensuing reaction from investors.

In July, United’s second-quarter report surpassed revenue estimates with a more than 5% year-over-year increase. Earnings per share (EPS) also beat expectations but reflected a 17% decline compared to the previous year. Yet the company still managed to break several internal records, including a remarkable 44.4 million passengers served during the quarter and a single-day record of 565,000 travelers.

This operational success fueled a brief rally in UAL stock, which jumped 3.7% immediately following the July 17 earnings release, ultimately closing the week 8.2% higher (and securing us the win).

Investors seemed to be balancing their optimism with concerns about ongoing labor cost increases, a challenge for all airlines as they renegotiate contracts with pilots and staff.

It’s also worth highlighting UAL’s strategic move to reduce debt and increase profitability through interest expense reductions. As labor costs continue to rise, this debt paydown strategy could offer an advantage over competitors like Delta Air Lines (DAL) and American Airlines Group (AAL), which are facing similar cost pressures.

Improving Consumer Sentiment

Consumer Happiness has been a sticking point for UAL, which traditionally lags behind its peers with an overall satisfaction rate of 53%. However, this sentiment has improved significantly, gaining 10 points on a month-over-month basis – supporting our thesis that UAL is leading the competition.

The uptick in positive sentiment suggests that United’s efforts to enhance the customer experience, including its recent collaboration with SpaceX to deliver mid-flight Wi-Fi, are resonating with passengers.

While competitors like Southwest Airlines Co.(LUV) have seen a decrease in happiness and satisfaction, United’s ability to buck this trend speaks volumes about its current trajectory.

Slower Web Traffic Across the Sector

One notable challenge across the airline industry is the declining web traffic. According to LikeFolio data, United’s site visits have fallen by 12% year over year on a 30-day moving average.

Although this is concerning for the future, it is worth noting that Delta and Southwest are seeing even steeper declines, indicating that United may be outperforming its peers in customer engagement, even in a challenging environment.

The key takeaway: United has proven its resilience through fleet enhancements, debt reduction, and consumer satisfaction improvements. The company is outperforming its competitors in key LikeFolio metrics – all while leveraging its leading international presence.

While challenges such as rising labor costs and slower web traffic remain, United’s strategic decisions should keep it on the path to further growth.

Results Speak for Themselves

Looking forward to United’s third-quarter earnings report, we saw a company well-positioned for continued success and on track to maintain its positive momentum.

Last night’s results proved our bullish call was right.

United’s third-quarter revenues grew 2.5% year over year to $14.8 billion, capacity was up 4.1%, and adjusted earnings of $3.33 per share surpassed analyst expectations of $3.17 per share. The company also announced its first share buyback program since before the COVID-19 pandemic, sending the stock higher and kicking off Week 1 of Earnings Season Pass with a massive win.

Earnings season is our favorite time of year at LikeFolio – and this season is only just getting started.

Over the next 10 weeks, we’ll see hundreds of companies report their numbers. Stock prices will swing wildly. And the trading opportunities will come fast and furious.

We’d love to have you trading along with us.

Until next time,

Andy Swan
Founder, LikeFolio

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