Advertisement
Advertisement

United Airlines Q4 Earnings to Improve; Omicron Spike A Risk For Aviation

By:
Vivek Kumar
Updated: Apr 18, 2022, 13:51 UTC

International leisure demand increased and domestic travel continued to be strong in the holiday quarter, which would have benefited United Airlines.

Highrise,Buildings,In,Wall,Street,Financial,District,,New,York,City

In this article:

The major U.S. airline company United Airlines is expected to report a loss for the eight-consecutive time of $-2.12 in the holiday quarter as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions.

However, that would represent a year-over-year improvement of about 70% from -$7.0 per share seen in the same period a year ago. The Chicago, Illinois-based airlines would post revenue growth of over 130% to $7.94 billion.

One of the biggest risks facing the airline industry is the rising number of cases of the new Omicron coronavirus. Since COVID-19 knocked the industry to its knees in 2020, American airlines have come a long way. But the pandemic still looms large.

A new wave of sickness caused by a highly contagious virus variant, the Omicron Coronavirus, has caused chaos for a short-staffed industry. In addition to an increase in daily sick calls, winter storms have led to mass flight cancellations, according to a Reuters report.

“Despite some headwinds around staffing issues, we expect United Airlines (UAL) to guide to a continued sequential improvement with capacity guided to be down in the 17-18% range in Q1, which incorporates domestic capacity down in the 1% range, while international capacity remains down 27%,” noted Sheila Kahyaoglu, equity analyst at Jefferies.

“Remaining in a Net Loss Position into Q1. We expect a continued sequential decline in CASM-ex to 11.63¢, which reflect a 9% increase vs. 2019 levels, which compares to the 13% increase we expect in Q4. Nonetheless, UAL will remain in a net loss position in Q1, before turning positive in Q2.”

United Airlines shares traded 0.34% higher in pre-market trading on Wednesday. The stock gained over 7% so far this year after rising just over 2% in 2021.

Analyst Comments

United Airlines (UAL) is our 2022 Best Idea. They should benefit from increased international leisure demand and continued strength in domestic leisure travel. Any business travel recovery would be a boon. We expect UAL to focus on paying down debt and improving its balance sheet while maintaining strong liquid it,” noted Helane Becker, equity analyst at Cowen.

“We are maintaining our Outperform rating on the common shares of United Airlines. We believe these shares can sell at 7x our preliminary 2023 EPS estimate of $11.18 or $78 /share. Our estimate is 47% greater than the $7.59 consensus. We attribute our optimism relative to the peer group to our view that international leisure destinations will outperform domestic beginning in summer 2022 and continue into 2023 and beyond.”

United Airlines Stock Price Forecast

Nine analysts who offered stock ratings for United Airlines in the last three months forecast the average price in 12 months of $60.00 with a high forecast of $78.00 and a low forecast of $42.00.

The average price target represents a 27.93% change from the last price of $46.90. From those nine analysts, five rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $60 with a high of $95 under a bull scenario and $27 under the worst-case scenario. The firm gave an “Equal-weight” rating on the Airlines’s stock.

“Why Equal-weight? We like United Airlines’ (UAL) confidence in providing a 2023 cost guide which includes a goal to permanently reduce $2 bn 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. BofA Global Research raised the price objective to $42 from $40. Bernstein cut the target price to $73 from $78. Raymond James lowered the target price to $75 from $78. Citigroup cut the price target to $64 from $67.

Technical analysis also suggests it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator gives mixed signals.

Check out FX Empire’s earnings calendar

About the Author

Vivek has over five years of experience in working for the financial market as a strategist and economist.

Did you find this article useful?

Advertisement