United Airlines Q1 Earnings to Decline Over 168%

United Airlines Holdings, one of the largest airlines in the world, is expected to report a loss for the fifth consecutive time of $6.91 in the first quarter of 2021 on April 19 as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and renewed travel restrictions.

That would represent a year-over-year decline of over 168% from -$2.57 per share seen in the same quarter a year ago. The Chicago-based airline’s revenue would decline about 60% to around $3.3 billion.

“Most of the US airlines will report 1Q21 earnings the week of April 19 and 26. We expect the focus to be on higher fuel costs, the nascent traffic recovery, and improving the balance sheet. Our focus remains on domestic leisure airlines while watching borders reopening to determine recovery for international traffic. We also expect airlines to talk about repairing their balance sheet,” said Helane Becker, equity analyst at Cowen and Company.

United Airlines Holdings in its filing with the U.S. Securities and Exchange Commission (SEC) on Monday, April 12, said it expects revenue to slump 66% to $3.2 billion in the first quarter of 2021.

However, United Airlines shares, which slumped more than 50% last year, rebounded over 29% so far this year.

United Airlines Stock Price Forecast

Fourteen analysts who offered stock ratings for United Airlines in the last three months forecast the average price in 12 months of $63.83 with a high forecast of $74.00 and a low forecast of $54.00.

The average price target represents a 13.46% increase from the last price of $56.26. Of those 14 analysts, seven rated “Buy”, six rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $65 with a high of $96 under a bull scenario and $30 under the worst-case scenario. The firm gave an “Equal-weight” rating on the airline’s stock.

“Why Equal-weight? We like UAL’s confidence in providing a 2023 cost guide which includes a goal to permanently reduce $2 billion of cost and at least match 2019 margins. The market is also very keen to see UAL’s go-to-market strategy on the revenue side as travelers return,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“However, the legacy network footprint is a slightly bigger overhang than its network peers and the cap structure will likely take years to normalize, which could remain overhangs on the stock.”

Several other analysts have also updated their stock outlook. Cowen and Company lifted the target price to $65 from $53. Raymond James raised the target price to $80 from $60. JP Morgan increased the price objective to $58 from $43. Citigroup upped the price target to $67 from $54. Jefferies lifted the target price to $60 from $55.

Analyst Comments

“United Airlines along with its peers, American and Delta, have revised their full-year outlook with a likelihood of positive cash generation in summer. Assisted by the government’s payroll support program, United reported just $4 billion of operating cash outflow in 2020 – fairly lower than the $6.5 billion drop in the stock’s market capitalization,” noted analysts at TREFIS.

“Positive sentiment surrounding a quicker than anticipated recovery in travel demand has pushed UAL stock from $40 in early January to $58 at present. However, the risks associated with a fourth wave of the pandemic triggered by new virus strains remain a concern. Thus, Trefis believes that the stock is fairly valued.”

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