(Bloomberg) -- United Airlines Holdings Inc. reported a third-quarter profit ahead of Wall Street’s expectations in a sign the company is bouncing back from widespread fare discounts that squeezed many carriers this summer.
Adjusted profit was $3.33 a share in the period, topping the $3.07 average of analyst estimates compiled by Bloomberg. The company also authorized a new $1.5 billion share buyback, including as much as $500 million this year.
The results indicate that United is recovering quickly from deep price cuts across the industry as airlines fought to fill an excess of seats in the market during the summer travel season.
Airlines cut “unproductive” flying plans in mid-August as expected and United saw “a clear inflection point in our revenue trends,” Scott Kirby, the carrier’s chief executive officer, said in a statement on Tuesday.
United’s shares rose as much as 1.8% in premarket trading on Wednesday ahead of the company’s earnings call. The stock has gained more than 50% this year, beating the roughly 22% advance by the S&P 500 Index.
The move to buy back shares was “a refreshing vote of confidence from the board in the long-term potential of United’s growth strategy,” Barclays analyst Brandon Oglenski said in a note to clients. The bank sees “significant value” in the company’s shares over the long term, he said.
United this year has managed to largely sidestep major troubles that have tripped up its biggest rivals. Delta Air Lines Inc. flights were snarled for several days in July by a technology outage. American Airlines Group Inc. is trying to rebound from a loss of corporate customers. Southwest Airlines Co. is battling with an activist investor seeking a leadership overhaul while trying to transform its business model.
US aviation regulators recently concluded a review of United’s operations after finding no major safety issues.
United said it expects an adjusted fourth-quarter profit of $2.50 to $3 a share. The midpoint of that range is consistent with the $2.75 per share expected by analysts. Delta, the first major airline to report results for the most recent period, last week forecast a fourth-quarter profit and sales below analysts’ estimates.
Third-quarter revenue of $14.8 billion also exceeded the $14.7 billion consensus from Wall Street. The results were helped by a 13% increase in corporate travel sales from a year ago and a 5% rise in premium revenue. Sales of basic economy tickets, a bare-bones fare used to lure travelers from discount carriers, jumped 20%.
United had earlier said an industry gauge of demand and pricing turned positive in August, ahead of a September improvement across the industry, as airlines began cutting unprofitable routes and fares started moving higher.
United’s new share repurchase authorization is the company’s first since the pandemic brought air travel to a near standstill in 2020. The buybacks will be funded by free cash flow, the airline said.
With United’s share count about 30% higher than it was five years ago, resuming buybacks “has been a long-awaited milestone for investors,” TD Cowen analyst Tom Fitzgerald said in a note.
(Updates shares, adds analyst comment from the fifth paragraph.)
©2024 Bloomberg L.P.