United Airlines

United Airlines Shares Slump Over 4% as Q1 Revenue Outlook Disappoints

United Airlines Holdings, one of the largest airlines in the world, in its filing with the U.S. Securities and Exchange Commission (SEC), said it expects revenue to slump 66% to $3.2 billion in the first quarter of 2021, sending its shares down over 4% on Monday.

Following this, United Airlines shares, which rose over 29% so far this year, slumped over 4% to $55.98 on Monday. The stock declined more than 50% last year.

In March 2021, the Chicago, Illinois-based airline said it observed a forward acceleration in customer demand for travel and new bookings, resulting in positive average daily core cash flow and expected positive average daily core cash flow moving forward. The average daily core cash flow (or core cash burn) for the first quarter of 2021 is expected to be nearly negative $9 million per day, an improvement of about $10 million from the last quarter of 2020.

The airline which operates a large domestic and international route network is scheduled to report first-quarter 2021 earnings on Monday, April 19.

United Airlines would post a loss for the fifth consecutive time of $6.76 in the first quarter of 2021 as the airlines continue to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions. That would represent a year-over-year decline of over 160% from -$2.57 per share seen in the same quarter a year ago.

United Airlines Stock Price Forecast

Twelve analysts who offered stock ratings for United Airlines in the last three months forecast the average price in 12 months of $60.27 with a high forecast of $74.00 and a low forecast of $40.00.

The average price target represents a 7.68% increase from the last price of $55.97. Of those 12 analysts, six rated “Buy”, six rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $65 with a high of $96 under a bull scenario and $30 under the worst-case scenario. The firm gave an “Equal-weight” rating on the airline’s stock.

“Why Equal-weight? We like UAL’s confidence in providing a 2023 cost guide which includes a goal to permanently reduce $2 bn of cost and at least match 2019 margins. The market is also very keen to see UAL’s go-to-market strategy on the revenue side as travelers return,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“However, the legacy network footprint is a slightly bigger overhang than its network peers 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 outlook. Citigroup raised the stock price forecast to $67 from $54. Jefferies lifted the target price to $60 from $55. Bernstein upped the target price to $67 from $61. UBS increased the target price to $67 from $58. Deutsche Bank raised the target price to $60 from $56. Berenberg lifted the target price to $38 from $32.

Analyst Comments

UAL pre-announced revenues of ~$3.2BB (vs. our prev est./cons. of $3.4BB/3.3BB), down 66% vs. 2019 levels. This compares to UAL’s previous guidance of down 65-70% for the quarter. We adjust our revenue estimate down another 5% to account for the slightly weaker demand environment,” noted Sheila Kahyaoglu, equity analyst at Jefferies.

“However, in March 2021 UAL observed a forward acceleration in customer demand for travel and new bookings. For Q2, we estimate the declines moderate slightly with revenue down 60% vs. 2019 levels and accelerates in the back half, exiting the year at down 30%.”

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