United Airlines Posts Record Revenue but Misses on Earnings as Fuel Bites

United Airlines (NASDAQ: UAL) shares slipped 2.1% in after-hours trading today after the carrier’s adjusted earnings per share narrowly missed forecasts despite record revenue. The airline reported adjusted diluted EPS of $2.54, against $2.57 expected by 19 analysts surveyed by Yahoo Finance.

The stock changed hands at $95.70 after the close, having finished the regular session up 2.3% at $97.77. It had fallen about 17% over three months from roughly $117.50 on the 20th of July.

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Revenue rose 17.4% to a record $17.875bn, a hair below the $17.91bn Yahoo Finance consensus from 16 analysts. Adjusted EPS was down 8.6% from $2.78 a year earlier and was the first miss after four consecutive beats, according to Yahoo’s earnings history.

Measure	Reported	Yahoo consensus
Revenue	$17.875bn	$17.91bn
Adjusted diluted EPS	$2.54	$2.57

On a GAAP (US accounting standards) basis, diluted EPS rose to $3.14 from $2.90, helped by $215m of net special credits, mainly gains on aircraft sale-leasebacks.

Fuel was the pressure point. Fuel expense jumped 61.6% to $4.84bn as the average price reached $3.90 a gallon from $2.43, adding $1.8bn of cost. Adjusted pre-tax margin fell to 6.2% from 8.0%, even though total revenue per available seat mile (TRASM) rose 15.9% on capacity up just 1.3%.

Guidance was firmer. United expects fourth-quarter revenue growth to accelerate to more than 20% year on year. Yahoo’s pre-result consensus of $18.25bn implies about 18.5%, and those estimates may now be revised.

Cash was weaker. Free cash flow was negative $1.84bn after $2.14bn of net capital spending, and net leverage rose to 2.4 times from 2.1. Liquidity stood at $17.7bn, and the revolving credit facility was expanded to $5bn from $3bn on Friday. Chief executive Scott Kirby said:

Our employees met the challenge of our ever-changing environment and our results prove the resilience of focusing on building a brand-loyal airline for customers.

Scott Kirby, chief executive, United Airlines