United Continental (UAL) Guidance Looks Light but Management Commentary was Bullish - Morgan Stanley
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Morgan Stanley analyst Ravi Shanker reiterated an Equalweight rating and $65.00 price target on United Continental (NASDAQ: UAL) after the 2Q guide was slightly below consensus but management was constructive about tracking well on the rebound with encouraging milestones and bullish expectations of normalization. The company reported 1Q21 EPS of ($7.50), which was 1.5% better than the MS estimate of ($7.62) and below consensus. Op Revenues were $3.22 bn, ~inline with the analyst's ~$3.23 but below consensus of $3.26 bn. Average daily cash burn for the March quarter was $9m. Management expects 2Q TRASM to be down 20% vs. 2Q19, 2Q capacity to be down 45% vs. 2Q19, 2Q Opex ex Charges to be down 32% vs. 2Q19, with 2Q fuel price of $1.83, and 2Q EBITDA margin of -20% (vs.-12% Cons).
The analyst stated "Milestones for the rest of the year look encouraging. Mgmt. said that April load factors were slightly behind 2019 with May expected to be ahead with 80%+ for June and beyond – as we noted in our Sep 2020 sector initiation, we expect load factors to be the first revenue metric to normalize this cycle, followed by traffic/ASM and finally PRASM. However, mgmt. noted that yields were also back up to 2019 levels already, which is a very bullish sign. Re traffic, mgmt. noted that wherever travel was permitted without restrictions, volumes were already above 2019 levels."
Shares of United Continental closed at $50.40 yesterday.
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