United (UAL) is down 7% premarket and weighing on fellow airline stocks this morning after the company updated its long-term outlook at its Investor event last night.
While fiscal 2018 EPS guidance of $6.50-8.50 was in-line with expectations, the company also guided for capacity growth of 4-6% over the next three years, which was higher than expected. United is trying to recoup lost market share on the domestic front.
Airline stocks are selling off over fears that other airlines will increase capacity in response, which will weigh on prices, or unit revenue, the key metric for the group. Airlines stocks have performed well as the unit revenue outlook has been strong, so some profit taking in the face of potential increased competition does not come as much of a surprise.
United also reported fourth quarter results last night, beating fourth quarter earnings estimates. United reported fourth quarter unit revenue up 0.2%. Two weeks ago, the company raised fourth quarter unit revenue guidance to flat from down 0-2%. United also guided for first quarter unit revenue up 0-2%.
Evercore ISI downgraded UAL this morning.
American (AAL) will report tomorrow morning. American also raised fourth quarter unit revenue guidance two weeks ago.
Airline stocks (JETS) premarket: United UAL -7%, American AAL -5%, Delta DAL -5%, Spirit SAVE -5%, Alaska ALK -5%, Southwest LUV -4%, Jet Blue JBLU -4%, Hawaiian HA -2%, Allegiant ALGT -1%