img(src="https://www.facebook.com/tr?id=606031673284807&ev=PageView&noscript=1" height="1" width="1" style="display:none")
United Airlines Is a Buy at These Levels, Says Analyst

United Airlines Is a Buy at These Levels, Says Analyst

Any way you see it, it's no fun being a carrier in 2020. United Airlines Holdings (UAL) revealed third quarter earnings last week, and astonishing no one, the outcomes were pretty bleak.


Any way you see it, it's no fun being a carrier in 2020. United Airlines Holdings (UAL) revealed third quarter earnings last week, and astonishing no one, the outcomes were pretty bleak.


Revenue came in at $2.49 billion, a year-over-year decline of 78.1% and missing the estimates by $50 million. Non-GAAP EPS of - $8.16 likewise came in beneath the Street's forecast by $0.61. 


On the positive side, due to aggressive cost cutting, the company figured out how to meet its Q3 $25 million daily cash burn target, improving by 38% on the June quarter's $40 million daily break.


Looking forward, management said the request is consistently improving and expects a 10-point consecutive increase in demand for the December quarter. In any case, as expected, the interest is significantly lower than last year's, and UAL plans to run at limit levels 55% beneath 4Q19.The company at present envisions a 67% year-over-year income drop in Q4.


United saw out Q3 with $19.4 billion in total accessible liquidity (not contemplating the $2.3 billion UAL is hoping to secure under the CARES Act Loan Program). The figure is over the underlying target of boosting liquidity to $18 billion before the end of the quarter and more than the $15.2 billion it had on July 20, when it declared Q2 results. 


For Deutsche Bank analyst Michael Linenberg, the “cash burn and liquidity metrics continue to show signs of improvement.” While the analyst believes the company is “starting to see the light at the end of a very long tunnel,”  the current large scale conditions make it hard to anticipate UAL's trajectory. 


“We are widening our full year loss per share from $25.00 to $26.65 due to a Sep Q loss that was 11% wider than our forecast (we readily admit that forecasting airline results during a global pandemic is one of the more challenging tasks we’ve dealt with as a sell-side analyst) and to reflect higher interest expense in the Dec Q. We are modeling United’s cash burn to average $18 million for the quarter or 15% better than what it was in the September quarter,” Linenberg commented.


Regardless of the outcomes, Linenberg stays “constructive on the name” and reiterated a Buy rating on UAL shares, alongside a $54 value target. This figure infers 58%.


With everything taken into account, while considering UAL's possibilities, the remainder of the analyst community's views are a mixed bag. In view of 5 Buys, 6 Holds and 1 Sell, the stock qualifies with a Moderate Buy consensus rating. With an average price focus of $42.71, the Street foresees potential gain of 20% in the year ahead.




Economic Calendar Highlights


  • U.K. Retail Sales MoM: 7:00am

Retail Sales measure the change in the total value of inflation-adjusted sales at the retail level. It is the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.

 

A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.


  • U.S. Initial Jobless Claims: 1:30pm

Initial Jobless Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. This is the earliest U.S. economic data, but the market impact varies from week to week.


A higher than expected reading should be taken as negative/bearish for the USD, while a lower than expected reading should be taken as positive/bullish for the USD.


  • U.S. Existing Home Sales: 3:00pm

Existing Home Sales measures the change in the annualized number of existing residential buildings that were sold during the previous month. This report helps to gauge the strength of the U.S. housing market and is a key indicator of overall economic strength.


A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.