UAL reports higher sales, narrowed losses
April 27, 2010
UAL lost $82 million, or 49 cents per share, an improvement from the prior-year loss of $382 million, or $2.64 per share, even as volatile fuel expenses increased nearly 20 percent.
Analysts surveyed by Yahoo Finance were expecting a loss of 77 cents in the quarter ended March 31. Chicago-based UAL, the holding company for United Airlines Inc., reported a revenue increase of nearly 15 percent to $4.24 billion from $3.69 billion the prior year.
UAL executives said the airline is still has a long way to go. “There is much more work to do and much more potential to be realized,” said United's Executive Vice President John Tague.
The company announced Friday a change in its frequent flier mileage revenue calculation. Analysts were supportive of the change in accounting practice, which lifted revenue per available seat mile – an industry metric measuring demand—by an estimated 1.5 percent to 2 percent
Hudson Holding Corp. analyst Daniel McKenzie raised his full-year earnings estimate to $3.20 per share from $2.30 based on the accounting change.
Analysts’ reactions ranged from tentative to positive about the quarter.
“We believe fundamentals are very solid,” wrote Gary Chase, an analyst with Barclays Bank PLC, in a research note. He raised his earnings estimate for the year to $2.55 from $1.40 and the target stock price to $30 from $25.
UBS Securities LLC analyst Kevin Crissey maintained his 2010 target price of $30 and full-year earnings per share forecast of $2.30. He wrote in a note that “compared to our model, revenue and costs were in-line to slightly worse.”
United executives expressed cautious optimism about the quarter during a conference call with analysts, referencing signs of recovering customer demand.
CEO Glenn Tilton said the company was “encouraged to see early recovery” in business passenger revenues. He also repeatedly mentioned United’s position among its competitors, adding the company posted the “best net margin of the five major U.S. carriers.”
Despite repeated attempts by analysts to address United’s merger talks with Continental Airlines, executives declined to comment during the conference call.
United stock closed Tuesday at $20.51, down $1.85 or 8.3 percent.
Cautious optimism for Boeing in 2010
April 21, 2010
Boeing Co., a leading aerospace manufacturer, reported decreased earnings Wednesday based on continuing soft sales in its commercial aircraft segment, but beat analysts’ expectations by 6 cents. Its stock rose 3.9 percent.
First-quarter earnings for the Chicago-based company fell 14.9 percent to $519 million, or 70 cents per diluted share, down from $610 million, or 87 cents per diluted share, last year. Analysts surveyed by Yahoo! Finance were expecting earnings of 64 cents.
Earnings reflected a 20-cent per share charge related to the recent healthcare legislation.
Boeing’s revenue for the quarter ended March 31, decreased 8 percent to $15.2 billion from $16.5 billion in 2009.
Boeing decreased its earnings guidance for the rest of the year to between $3.50 and $3.80 from its previous forecast of $3.70 to $4.00 based on healthcare costs. The $64 billion to $66 billion revenue forecast for 2010 was attributed to lowered aircraft production rates and reduced military spending.
“We are pleased with our first-quarter performance but recognize there is a lot of work to be done this year across both of our businesses,” said Boeing President James Bell during a call with analysts.
The company’s commercial airplanes segment saw an upswing in profit margin but decreased revenues, which dropped 13 percent to $7.47 billion from the same quarter last year. Boeing attributed lower revenues to fewer 747 airplane deliveries and issues with its seat supplier. Even so, margins for the commercial unit increased to 9.1 percent of sales from 4.9 percent during the first quarter of 2009. The company cited “strong operating performance” as the reason for the increase.
Boeing’s other business sector – defense, space and security – also saw a modest decrease in revenues over the previous year, shrinking 1 percent to $7.61 billion. The decline was driven primarily by lower volume in its network and space systems division. Margins decreased to 8.7 percent of revenue from 9.2 percent last year.
Chairman and CEO Jim McNerney indicated that the U.S. Department of Defense and other military agencies continue to face significant budget pressures.
Boeing’s business volume is split between its commercial and defense segments. Despite some shrinkage in its military revenue forecasts and slower sales on the commercial side, Boeing will continue to invest in program development for the rest of the year. R&D spending is forecast to rise to between $3.9 billion and $4.1 billion. Operating cash flow is expected to be zero for the year, reflecting a pension contribution of less than $100 million and a buildup of inventory.
Analysts are supportive of Boeing’s significant capital expenditures but are cautious about program development costs. A new assembly line for 787s in South Carolina, was an expected investment with the bulk of the costs landing in 2010.
“Boeing has significant execution risk related to its development programs, both in its commercial and military businesses,” wrote UBS Securities LLC analyst David Strauss in a research note. Strauss maintained his “neutral” rating with earnings estimates of $3.80 for the year, on the high end of the company’s guidance.
“We believe it is a positive sign that R&D guidance remains unchanged for the year,” wrote Stifel Nicolaus & Co. Inc. analyst Troy Lahr in a research note.
The company expects R&D spending to drop in fiscal 2011.
Boeing stock closed at $74.16 on Wednesday, up $2.75 per share, or 3.9 percent.
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