United Airlines Flies Sideways After Quarterly Earnings Crash

United Airlines Holdings, Inc. (UAL) traded flat in the extended-hours session Wednesday after the Chicago-based carrier swung to a net loss of $1.8 billion in the third quarter (Q3) as the coronavirus pandemic continued to pummel air travel demand.

The airline reported adjusted earnings of -$8.16 per share, a wider loss than the -$7.53 figure Wall Street had expected. This compares to earnings per share (EPS) of $4.07 a share in the year-ago quarter. Revenue of $2.49 billion came in roughly in-line with analysts’ expectations of $2.50 billion. However, the metric fell nearly 80% from the September 2019 quarter as the airlines slashed capacity.

Management anticipates the challenging conditions to continue over the short-term but remains more optimistic about the longer-term future. “Even though the negative impact of COVID-19 will persist in the near term, we are now focused on positioning the airline for a strong recovery that will allow United to bring our furloughed employees back to work and emerge as the global leader in aviation,” United CEO Scott Kirby said in a statement accompanying the quarterly results, per Business Insider.

Through Wednesday’s close, United Airlines stock has a market capitalization of $10.36 billion and trades nearly 70% lower on the year. Since mid-July, price performance has improved, with the shares gaining 12%.

Improving Efficiency

The company said it reduced its daily cash burn and principal debt payments during the quarter to $25 million a day, down from an average of $40 million per day in the previous quarter. Meanwhile, total operating costs plummeted by nearly 60% compared to the third quarter of 2019. United also said it had commenced furloughing up to 13,000 employees after federal payroll support expired at the end of last month.

Wall Street View

JPMorgan analyst Jamie Baker upgraded United Airlines to ‘Overweight’ from ‘Neutral’ and lifted his price target to $52 from $44. Baker argues the company “can endure the current downturn with sufficient liquidity,” despite the recent volatility in the airline sector.

Most other analysts on Wall Street remain mostly bullish on the stock. It receives 7 ‘Buy’ ratings, 1 ‘Overweight’ rating, and 12 ‘Hold’ ratings. Just one analyst currently recommends selling. Price targets range between $60 and $32, with the average consensus 12-month target sitting at $43.41. This implies an upside of 22% from yesterday’s $35.61 close.

Technical Outlook and Trading Tactics

United shares have remained in a narrow eight-point range since late June, with neither the bulls nor bears able to take control of the price action. Instead of trying to guess which way price will break out, let the market determine direction. If the stock breaks to the upside, look for a retest of the June swing high at $48.95. Alternatively, if the shares break below the trading range, anticipate a fall back down to crucial support around the $22.50 level.