Improved results of United Airlines in the fourth quarter; Omicron Spike, a risk for aviation
TMajor U.S. airline United Airlines is expected to report a loss for the eighth consecutive time of $ -2.12 in the holiday quarter as the airline service provider continues to be negatively affected by the COVID-19 pandemic and current travel restrictions.
However, that would represent an improvement of about 70% year-over-year from – $ 7.0 per share in the same period a year ago. Airlines based in Chicago, Ill. Are reportedly posting revenue growth of more than 130% to $ 7.94 billion.
One of the biggest risks facing the airline industry is the growing number of cases of the novel coronavirus Omicron. Since COVID-19 brought the industry to its knees in 2020, U.S. airlines have come a long way. But the pandemic remains significant.
A new wave of illness caused by a highly contagious viral variant, the Omicron coronavirus, has wreaked havoc on an understaffed industry. In addition to an increase in daily sickness calls, winter storms have resulted in massive flight cancellations, according to a Reuters report.
“Despite some headwinds over personnel issues, we expect United Airlines (UAL) to move towards continuous sequential improvement with guided capacity down 17-18% in the first quarter, which includes domestic capacity down by around 1%, while international capacity remains down 27%, ”noted Sheila Kahyaoglu, equity analyst at Jefferies.
“Stay in a net loss position in the first quarter. We expect the CASM-ex to continue sequentially to 11.63 ¢, reflecting a 9% increase from 2019 levels, compared to the 13% increase we expect in the fourth quarter. Nonetheless, UAL will remain in a net loss position in the first quarter before turning positive again in the second quarter. “
United Airlines shares traded up 0.34% on pre-market trading on Wednesday. The stock has gained over 7% so far this year after rising just over 2% in 2021.
“United Airlines (UAL) is our best idea for 2022. They are expected to benefit from increased international pleasure demand and continued strength in domestic pleasure travel. Any resumption of business travel would be a godsend. We expect UAL to focus on paying down debt and improving its balance sheet while maintaining strong liquidity, ”noted Helane Becker, equity analyst at Cowen.
“We are maintaining our outperformance rating on United Airlines common stock. We believe these stocks may sell for 7 times our preliminary estimate of 2023 EPS of $ 11.18 or $ 78 / share. Our estimate is 47% higher than the consensus of $ 7.59. We attribute our optimism over the peer group to our view that international leisure destinations will outperform domestic destinations from summer 2022 and continue into 2023 and beyond. “
United Airlines Share Price Forecast
Nine analysts who came up with stock ratings for United Airlines in the past three months predicted a 12-month average price of $ 60.00 with a high forecast of $ 78.00 and a low forecast of $ 42.00.
The target average price represents a change of 27.93% from the last price of $ 46.90. Of 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 in a bullish scenario and $ 27 in a worst-case scenario. The company has given the airline’s stock a “peer-to-peer” rating.
“Why equal weight? We appreciate the confidence of United Airlines (UAL) in providing a 2023 cost guide that includes a goal of permanently reducing $ 2 billion in costs and at least matching 2019 margins. The market is also very strong. keen to see UAL’s go-to-market strategy on the revenue side as travelers come back, ”noted Ravi Shanker, equity analyst at Morgan Stanley.
“However, the legacy network footprint is a slightly larger overhang than its network counterparts, 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 market outlook. BofA Global Research has raised the price target from $ 40 to $ 42. Bernstein reduced the target price from $ 78 to $ 73. Raymond James lowered the target price from $ 78 to $ 75. Citigroup reduced the price target from $ 67 to $ 64.
Technical analysis also suggests that it is good to hold on for now as the 100-day moving average and 100-200-day MACD oscillator are giving mixed signals.
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