United Airlines Raises Q1 Guidance
United Airlines Holdings Inc. (UAL) is trading higher by more than 6% in Tuesday’s pre-market after increasing Q1 2022 revenue guidance. The carrier now expects revenue to decline 20% to 25% compared to Q1 2019, yielding $7.67 to $7.91 billion compared to prior $7.53 billion guidance. In addition, Q1 capacity is expected to drop 19% compared to 2019. The company forecast an average Q1 fuel price of $2.99 per gallon, contained by hedging contracts ahead of the most recent crude oil spike.
Business Travel Rebound?
United insists that business travel is rebounding faster than expected but carriers said the same thing in early 2021, ahead of two COVID variants that forced corporations to delay travel plans. The optimism seems unfounded at this point, given international tensions that will impact the European continent throughout 2022, as well as soaring ticket prices that force air travelers to reconsider plans. In fact, basic economy has already jumped to $600 or more for U.S. transcontinental travel in June and is likely to head higher.
The company also noted that system booking of leisure travelers had surged almost 40 basis points since the first week of the year but it’s an odd comparison, given the Omicron variant was decimating flight staffs and schedules at that time, with over 3,000 infected employees. It’s also instructive that United didn’t discuss earnings-per-share (EPS) during the presentation because CEO Scott Kirby predicted in January that profitability would return in the second quarter.
Wall Street and Technical Outlook
Wall Street consensus stands at a ‘Hold’ rating based upon 9 ‘Buy’, 3 ‘Overweight’, 7 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, four analysts recommend that shareholders close positions. Price targets currently range from a low of $32 to a Street-high $78 while the stock is set to open Tuesday’s session about $5 above the low target. There’s plenty of potential upside with this dismal placement but airlines need a safer world to attract customer growth.
United Airlines posted an all-time high at 97.85 in 2018 and turned lower, breaking 6-year support in the upper 30s during 2020’s pandemic decline. The subsequent recovery wave stalled at the 50% selloff retracement and 200-week moving average in March 2021, ahead of a shallow downtrend that accelerated when Russia invaded the Ukraine. The decline has now reached 2020 support near 30 but bounces are likely to meet aggressive selling pressure above 40.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.