United Airlines beats third-quarter estimates, announces $1.5 billion share buyback

United Airlines (NASDAQ:UAL) reported third-quarter earnings that beat analyst expectations and announced a new $1.5 billion share repurchase program. The company’s shares traded relatively flat in Wednesday’s premarket.

The airline reported adjusted earnings per share of $3.33, beating analyst consensus of $3.13. Revenue for the quarter was $14.84 billion, slightly above estimates of $14.77 billion and a 2.5% increase from the prior year.

United CEO Scott Kirby (NYSE:KEX) noted that the company saw “a clear inflection point” in revenue trends as unprofitable capacity exited the market in mid-August.

The airline reported strong demand, with corporate revenues increasing 13% year-on-year in September and premium revenues increasing 5% in the quarter.

“A prosperous summer of 2024 is just the beginning as our enhanced customer experience, combined with United Next, positions the airline at the top of the industry for the foreseeable future,” said Kirby.

The company’s year-to-date (YTD) free cash flow (FCF) generation was $3.44 billion.

According to analysts at Citi, this is more than any other US airline. They said United’s results were “very encouraging”.

Additionally, the company’s board authorized a new $1.5 billion share repurchase program, representing about 7% of United’s market capitalization. This marks the first buyback program since its suspension in 2020 due to the COVID-19 pandemic.

CFO Michael Leskinen commented: “We are now in a position to add a share repurchase program as we continue to invest and deleverage our business. We are simultaneously targeting net leverage below 2x in the coming years.”

For the fourth quarter, United Airlines provided earnings guidance of $2.50 to $3.00 per share, which was in line with analyst consensus of $2.75.

“While an “in-line” 4Q guidance may not be very exciting for aftermarket stocks, we expect stocks to react positively to news of improving sequential unit revenue trends and a buyback,” Bernstein analysts said in a post- income note.

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The airline also highlighted operational improvements, ranking first in on-time departures among major U.S. airlines in the quarter.

Senad Karaahmetovic contributed to this report.

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