United Faces Turbulence From BoeingJan 25, 2024
Even the Max 9 groundings can’t diminish a stellar quarter
United Airlines smashed earnings expectations for Q4 and the stock is surging in early trading. However, there may be storm clouds on the horizon as all the fallout from the Boeing Max 9 groundings takes shape. Let’s explore what’s happening:
United managed to crush predictions by generating an adjusted $2 EPS from $13.63 billion in revenue. Revenue popped thanks to strong growth from premium tickets while earnings stayed strong due to solid fuel cost controls. For the full year of 2023, United just barely reached their expected EPS range, hitting $10.05.
WITH FRIENDS LIKE THESE
However, United tempered investor expectations by projecting a much wider loss in Q1 of 2024 thanks to the recent grounding of Boeing 737 Max 9 models. United operates with 79 of these models—so this grounding is honestly a huge hit to their flight capacity. United is bracing for a loss on Q1 revenue anywhere from $0.35 to $0.85 per share. Analysts were projecting a $0.23 per share loss—so these numbers are pretty steep. Fuel costs are compounding the pressure United faces to start the year.
WHY IT MATTERS
This is another bad blow to Boeing as well—showing how their aircraft can wreak extended havoc on their customers’ operations and ability to drive profit. At the same time, the market still loves United stock thanks to the great adjusted earnings beat. Investors boosted United by over 6% in early trading as folks bet on these headwinds being short-lived.