United Airline (UAL) Stock Gains on Smaller-Than-Expected 3Q Loss, Analysts Expect Stronger Recovery in 4Q and 2022

October 20, 2021 6:50 AM EDT
Get Alerts UAL Hot Sheet
Price: $39.06 -7.57%

Rating Summary:
    13 Buy, 16 Hold, 4 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 0 | Down: 4 | New: 29
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United Airlines (NYSE: UAL) stock is trading roughly 1.5% higher in pre-open Wednesday after the company reported better-than-expected Q3 results.

UAL reported EPS at negative $1.02 to beat the analyst consensus of negative $1.29. Revenue came in at $7.8 billion, slightly below the consensus estimate of $7.85 billion. The flying capacity fell 28% YoY.

"The recovery was delayed by the Delta variant, but the United team remains focused on our long-term vision – and not getting sidetracked by near-term volatility – meaning we're solidly on track to achieve the targets we set for 2022," said United Airlines CEO Scott Kirby.

"From the return of business travel and the planned re-opening of Europe and early indications for opening in the Pacific, the headwinds we've faced are turning to tailwinds, and we believe that United is better positioned to lead the recovery than any airline in the world.”

On the outlook front, UAL guided for revenue down 25%-30%, capacity down 23%.

Cowen analyst Helane Becker reiterated an Outperform rating and a $72.00 per share price target on UAL.

“Given a 28% decline in y/y2 capacity, we view this performance favorably. United is working on their carbon footprint; to that end gallons used declined 29.5% on a 28.2% increase in capacity. The company has been replacing older aircraft with new aircraft, something that will continue into the next few years,” the analyst said in a client note.

“The guidance for 4Q21 is somewhat disappointing with y/y2 revenue growth predicted to be down 25% - 30%, compared with our estimate and consensus which both hovered near down 25%. Adjusted CASM-ex of 12% - 14% y/y2 growth is also more pessimistic than our estimate of approximately 10% growth, coupled with an expectation of rising fuel costs.”

Deutsche Bank analyst Michael Linenberg also reiterated a Buy rating on improving trends.

“We are narrowing our 2021 loss per share forecast for United on the back of Sep Q beat driven by better revenue and cost performances. Furthermore, United reiterated that it was on track to reduce non-fuel unit costs in 2022 compared to 2019 (on 5% capacity growth). With the US reopening to non-essential, vaccinated foreign travelers next month and the continued recovery in corporate bookings, United is most leveraged, in our view, to those lucrative segments... With UAL's shares currently trading at 4.5x 2022 EBITDAR and 3.5x 2023 EBITDAR, we think they are attractively valued (compares to the stock’s historical, mid-cycle trading range of 5x - 7x), and therefore, reiterating our Buy rating on UAL shares,” Linenberg wrote in a note sent to clients.

Shares of UAL closed at $46.22 yesterday.

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