UPS forecasts improved earnings in 2010; Alaska and Continental report improved load factors
North and South American carriers’ stocks rallied on Tuesday (02-Feb-2010), pushed higher by Continental’s narrower than expected loss in unit revenue for Jan-2010. The AMEX Airline Index (+3.2%) ended trading up.
Also pushing airline stocks higher were gains in the wider market, with the Dow (+1.1%) making its biggest two day gain in three months on an improvement in housing sales for Dec-2009. Meanwhile a gain in oil prices (+2.1%), to USD74.43, did little to deter airline investor enthusiasm.
Continental Airlines estimates 1-2% drop in consolidated RASM
Continental Airlines (+2.3%) pushed airline shares higher after estimating a 1.0% to 2.0% year-on-year fall in consolidated passenger revenue per available seat mile (RASM) for Jan-2010, while mainline RASM is estimated to have decreased between 2.5% and 3.5%. See related report: Continental Airlines’ yields and traffic levels improve, but long and slow road to recovery
Analysts at Stifel Nicolaus stated last minute bookings assisted the carrier’s performance, adding it expects Continental’s RASM to increase 5.3% in 1Q2009.
Jesup & Lamont analyst Helane Becker, meanwhile reiterated her ‘Buy’ rating of the carrier, as the majority of the financial results were in line with expectations. Jesup & Lamont has Continental’s price target set at USD22.
Alaska Air reports improved load factors for Jan-2010
Alaska Air Group (+4.0%) also released its Jan-2010 traffic results during trading, reporting a 6.0 ppt year-on-year increase in load factor for Alaska Airlines, to 77.7%. Passenger numbers were up 4.5%, to 1.2 million. Horizon Air load factor meanwhile grew 5.7 ppts, to 68.8%, while passenger numbers were up 4.3%, to 523,000 for the month.
UPS forecasts improved earnings in 2010
UPS (+0.4%) gained only marginally after reporting a drop in 4Q2009 net profit, but forecast a sharp increase in 2010 earnings.
4Q2009 was better for the integrator, reporting diluted earnings per share of USD0.75 - above the company's original guidance of USD0.58-0.65 per share, due in large measure to strong performance by its international segment. That segment saw volume growth, a substantial gain in operating profit and improvement to a 16.7% operating margin. However, the quarter's diluted earnings per share declined 9.6% year-on-year. Overall net profit was up +198% year-on-year, to USD757 million.
For 2009, UPS generated free cash flow of USD4.1 billion and posted adjusted operating profit of USD4.0 billion. On a reported basis, operating profit was USD3.8 billion, down 29.4%, while net profit was down 28.3%, to USD2,152 million. Adjusted earnings per share were USD2.31 and USD2.14 on a reported basis.
UPS CFO, Kurt Kuehn, forecast earnings would improve as 2010 unfolds, with the carrier currently expecting diluted earnings per share of between USD2.70 to USD3.05, an increase of 17% to 32% year-on-year. Mr Kuehn noted 1Q2010 will be “the most challenging” of the year, with profitability only slightly better than 1Q2009. Cash generation is expected to remain strong, with capital expenditures totaling USD1.8 billion. Mr Kuehn stated this is well below UPS’ historical range but “still supports growth opportunities”.
North & South America selected airlines daily share price movements (% change): 02-Feb-2010