United Airlines Q3 Misses EPS Estimates, Guides Q4 Profit Well Below Estimates Amid Fuel Cost Surge

UAL reported third-quarter adjusted earnings of $2.54 per share, about three to four cents short of consensus estimates of $2.57 to $2.58. Revenue was a record $17.9 billion, up 17% from a year earlier and roughly in line with the consensus. GAAP diluted EPS was $3.14, and the company said adjusted EPS came in within its guidance despite a 62% increase in fuel expense.

The larger issue for investors is the fourth-quarter outlook. In its investor update, United guided fourth-quarter adjusted EPS to a range of $0.50 to $1.50, which Investing.com described as well short of the $1.88 consensus at the midpoint. The guidance assumes an all-in average fuel price of approximately $4.80 per gallon, compared with $3.90 in the third quarter. The investor update puts consensus fuel at about $4.35 for the quarter. Shares of the carrier inched lower in premarket trading on Wednesday.

Fuel is the swing factor. Fuel expense was $1.8 billion higher than in the same quarter a year earlier, and the company said every $0.01 change in the fuel price equates to approximately 2.5 cents of earnings per share for the quarter. United still expects fourth-quarter revenue growth to accelerate versus the third quarter, and it carried a record 49.5 million customers in the third quarter. Reuters headlined the update as a fourth-quarter profit forecast below estimates, citing costly fuel.

Investors may want to watch fuel prices relative to the $4.80 assumption, how much of the higher cost United can pass through in fares, and whether fourth-quarter revenue growth accelerates as the company expects.