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United Airlines earnings preview: More bad news

United Airlines Oscar Munoz

United Airlines (UAL) stock closed largely unchanged $34.49 on Thursday, ahead of the company’s second-quarter earnings report, due out after the close next  Tuesday. But the stock has tumbled 62% this year.

Similar to the first quarter, analysts expect the company’s second-quarter performance to reflect the negative impact that nationwide lockdowns have had on air travel. With demand significantly below year-ago levels in the entire April-June period, compared with the first-quarter impact limited mostly to March, analysts are sceptical on United Airlines (UAL) stock.

United Airlines is anticipated to have suffered a substantial loss of passenger revenues (accounting for more than 85% of the top line) in the to-be-reported quarter. The Zacks consensus estimate for second-quarter passenger revenues indicates a 93.1% drop from second-quarter 2019’s reported number.

United Airlines (UAL) Stock

Overall, total revenues are expected to decline 88% year over year for the second quarter. The Zacks estimate for the same indicates an 89.4% plunge from year-ago reported revenues.

The current state of the air travel sector in conjunction with the ongoing impact the coronavirus pandemic saw the airline slash capacity drastically.  In the last reported quarter, the company delivered a positive earnings surprise of 20.9% with narrower-than-expected loss, marginally beating the Zacks estimate. Prior to its second-quarter earnings report on Tuesday, the airline’s consensus 12-month target price of $41.27 is a 17.5% premium to current levels, which could signal some price-target cuts in the near future.

A look at the United Airline (UAL) stock’s history of post-earnings reactions during the past two years shows a positive response with an average post-earnings swing of 5.2% the last eight quarters, regardless of direction. This time around, the options market is pricing in a slightly higher move of 9.3%.

United Airlines has an earnings per share of +25.24% as the most accurate estimate is pegged at a loss of $7.04 and the Zacks estimate is pinned at a loss of $9.41.

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Galina Mikova

Galina is a Hubspot-certified Technical Writer with over 10 years of experience in working with Fortune 500, private investment, banking, FOREX and niche tech companies as well as crypto and blockchain startups. She has a solid background in FinTech and blockchain technology.