United Airlines (UAL) reported third-quarter earnings with an adjusted EPS of $3.33, beating analyst expectations of $3.07 and exceeding its own guidance range of $2.75 to $3.25. Revenue for the quarter was $14.84 billion, slightly above estimates of $14.78 billion, reflecting a 2.5% year-over-year increase despite a challenging operating environment that included significant cancellations due to the Crowdstrike hack. UAL's better-than-expected performance was driven by a mix of factors, including improving domestic revenue and easing fuel costs.
Key metrics from the report showed passenger revenue at $13.56 billion, slightly ahead of estimates, while cargo revenue surged 25% year-over-year to $417 million, significantly above the $374 million forecasted. However, UAL's load factor dipped to 85.3%, below the estimated 86.4%, and the airline saw a slight decline in yield per revenue passenger mile to $19.50, down from $19.72 a year ago. Capacity was up 4.1% year-over-year, while total revenue per available seat mile (TRASM) fell 1.6% year-over-year, indicating some pressure on pricing in certain regions.
UAL provided an optimistic economic readout, noting that domestic revenue has improved, and unprofitable capacity has exited the market, which is boosting demand. CEO Scott Kirby highlighted the positive trends in corporate and premium revenues, which rose 13% and 5% year-over-year in September, respectively. The airline also noted strong performance in its basic economy segment, with revenues up 20% year-over-year, following a 38% increase in the prior quarter. Despite some regional challenges, such as in the Middle East and China, UAL benefited from strength in regions like Southern Europe and Japan.
On the cost side, UAL's cost per available seat mile excluding fuel (CASM-ex) rose 6.5% year-over-year, reflecting continued inflationary pressures and higher labor costs. Fuel costs were better than expected, with the average price per gallon at $2.56, below estimates of $2.64. UAL reiterated its full-year capital expenditure forecast of under $6.5 billion, and the company announced a new $1.5 billion share repurchase program, marking its first buyback since the COVID-19 pandemic began.
UAL's management raised its full-year EPS guidance to a range of $9.82 to $10.32, supported by the improving revenue environment and ongoing cost control measures. For Q4, the airline expects earnings to be between $2.50 and $3.00 per share, which aligns with consensus estimates. UAL's free cash flow generation year-to-date was particularly impressive, at $3.44 billion, placing it ahead of all other U.S. airlines in terms of cash generation.
The report highlighted several notable consumer trends, including the resurgence of demand for premium and corporate travel, as well as the continued strength of basic economy offerings. UAL’s strategic focus on its United Next initiative, aimed at improving the customer experience and growing its fleet, positions the airline well for future growth, according to management. The company also emphasized its operational improvements, noting that it ranked first in on-time departures among major U.S. airlines for the quarter.
Despite the positive results, UAL's stock traded flat in premarket activity, reflecting some investor caution after the strong run-up in the stock price earlier in the year. However, analysts remain optimistic, with Deutsche Bank raising its price target from $60 to $80, and Citi maintaining a Buy rating with a $90 price target. The report also provided positive momentum for the broader airline sector, with UAL's performance standing in contrast to Delta's recent miss on earnings.