In The Spotlight – Big Wall Street Banks as the Main Power in S&P 500

Banks’ earnings

Big Wall Street banks are in the spotlight right out of the gate with Goldman Sachs set to release results before markets open. They will be followed by Bank of America, Morgan Stanley, and U.S. Bancorp tomorrow (Wednesday). Bank results got off to a mixed start on Friday. JPMorgan Chase, Citigroup, and Wells Fargo all topped profit estimates for Q4 but JPMorgan and Citi delivered disappointments in other areas.

In particular, investors are nervous about higher expenses that cut into Q4 profits for both JPMorgan and Citi and which both banks forecast would continue to weigh on results in 2022. JPMorgan and Citi also saw -11% decreases in trading revenue, with fixed income trading down by double digits for both.

There are also signs of slowing loan growth that some analysts worry is an early sign of slowing consumer demand for big-ticket items as inflation continues to climb. While banks will eventually benefit from higher U.S. interest rates that are anticipated in the year ahead, a big pullback in consumer lending is a threat to some of the more lofty Wall Street expectations had for the sector in 2022.

Global economy

Globally, not a lot changed over the extended weekend. China might have provided a bit of a surprise with additional monetary easing into a struggling GDP and sagging real estate prices. It’s worth noting, Omicron has now been detected in Beijing for the first time, just three weeks before the city is due to host the Winter Olympics. Now the Chinese are shutting down and suspending the sale of Olympic tickets to the public.

Tensions remain heated between Hong Kong activists and Chinese government officials. North Korea launched its fourth missile test this month. After North Korea’s missile test last week, the US announced sanctions on eight North Korean and Russian individuals and entities for supporting North Korea’s ballistic missile programs.

Tensions between the U.S. and Russia seem to be headed in the wrong direction with Russia over the weekend moving troops and equipment into Belarus for joint military exercises.

The so-called “Allied Resolve” drills are set to take place near borders with NATO members Poland and Lithuania, as well as Ukraine where Russia has maintained its alarming military presence.

Most U.S. military experts don’t really think Russia has any real intentions of invading Ukraine or any other EU country. However, Western countries also have increased their military presence along borders and other strategic locations which increases the chances that a broader conflict could “accidentally” be sparked.

Europe’s gas supplies are also at risk as Russia continues to dangle the threat of cutting them off. Most of the tension stems from Russia’s demand that former Soviet countries be barred from entering NATO, something the U.S. and other NATO allies have refused.

In the USA, we are heading deeper into earnings season and investors are going to be paying close attention to costs and expenses. As I mentioned, late last week, JPMorgan warned that higher expenses and higher spending on hiring in 2022 could create some headwinds.

Looking ahead, it will be interesting to see how many executive teams start providing guidance and warnings that corporate expenses are rising faster than anticipated and what if any damage will be due to profit margins?

Remember, some companies have said they are passing the additional rising costs on to the consumer while other companies are eating a majority of the higher expenses in an attempt to gain more market share.

How the stock market decides to differentiate the strategy and style could greatly impact money flow and valuations. Goldman Sachs, J.B. Hunt, Charles Schwab, Citrix, Concentrix, and Interactive Brokers report earnings today.

Data to watch

Tomorrow we have Alcoa, Bank of America, Kinder Morgan, Morgan Stanley, Procter & Gamble, and United Airlines.

Thursday we have American Airlines, Baker Hughes, Netflix, and Union Pacific.

Then next week we have big names like Apple, Boeing, Caterpillar, McDonalds, Microsoft and Verizon reporting earnings.

Let’s also not forget next week we have the first Fed FOMC meeting of the new year.

With the U.S. Federal Reserve getting ever closer to implementing its first rate hikes, which most anticipate will begin in March, investors are growing less enchanted with some of the high-growth and momentum stocks that saw outsized share price gains last year.

This trend is most evident in the tech-heavy Nasdaq where nearly half of the index’s stocks have fallen by -50% from their recent peaks. The Nasdaq itself is only down by about -7% from its most recent record high. The selloff has been very much concentrated in highly-leveraged companies that have yet to deliver a profit, as the prospect of higher rates reduce future profit potential. Earnings results from these high-fliers will likely be harshly scrutinized as Wall Street tries to separate the “wheat from the chaff,” so to speak.

On the economic data front, Empire State Manufacturing and the NAHB Housing Market are today’s highlights.

For a look at all of today’s economic events, check out our economic calendar.

Wall Street Week Ahead Earnings: Goldman Sachs, Procter & Gamble, United Airlines, and Netflix in focus

The following is a list of earnings slated for release January 17-21, along with a few previews. A number of big companies will report earnings in the week ahead, including Goldman Sachs and Bank of America, Procter & Gamble, Netflix, and a number of transportation companies. Investors will carefully monitor the latest news on the rapidly spreading Omicron coronavirus variant to see how it affects earnings in 2022.

Earnings Calendar For The Week Of January 17

Monday (January 17)

No major earnings are scheduled for release. The stock market in the U.S. will be closed in observance of Martin Luther King, Jr. Day.

Tuesday (January 18)

IN THE SPOTLIGHT: GOLDMAN SACHS

The New York-based leading global investment bank Goldman Sachs is expected to report its fourth-quarter earnings of $11.89 per share, which represents a year-over-year decline of about 2% from $12.08 per share seen in the same period a year ago.

The world’s leading investment manager would see a decline in revenue of nearly 1% to $11.65 billion from a year ago. It is worth noting that in the last two years, Goldman Sachs has surpassed market consensus expectations for profit and revenue most of the time.

“We expect Goldman Sachs to report mixed results, with revenues outperforming the consensus estimates and earnings missing the expected figure. The investment bank reported better than expected results in the last quarter, with the top-line increasing 26% y-o-y. This was driven by significant growth in the investment banking business, followed by higher global markets and consumer & wealth management revenues,” noted analysts at TREFIS.

“While investment banking grew on the back of growth in mergers &acquisitions (M&A) and equity underwriting deal volumes, global markets benefited from higher equity trading revenues. Similarly, the consumer & wealth management segment gained from an increase in outstanding loan balances. That said, the top-line was partially offset by negative growth in the asset management division, primarily due to lower equity investment revenues. We expect the same trend to continue in the fourth quarter. We estimate Goldman Sachs’ valuation to be around $447 per share which is 14% above the current market price.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 18

TICKER COMPANY EPS FORECAST
BAC Bank of America $0.78
SCHW Charles Schwab $0.83
CNXC Concentrix $2.54
HWC Hancock Whitney $1.33
IBKR Interactive Brokers $0.74
JBHT J.B. Hunt Transport Services $2.0
MBWM Mercantile Bank $0.85
ONB Old National Bancorp $0.38
PNFP Pinnacle Financial Partners $1.56
PNC PNC Financial Services $3.62
PRGS Progress Software $0.62
SBNY Signature Bank $3.92
TFC Truist Financial $1.27
UCBI United Community Banks $0.63

 

Wednesday (January 19)

IN THE SPOTLIGHT: PROCTER & GAMBLE, UNITED AIRLINES

PROCTER & GAMBLE: The world’s largest maker of consumer-packaged goods, is expected to report its fiscal second-quarter earnings of $1.66 per share, which represents year-on-year growth of just over 1% from $1.64 per share seen in the same period a year ago.

The Cincinnati, Ohio-based consumer goods corporation would post revenue growth of over 3% to $20.4 billion from a year ago. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“We believe strategy changes can sustain Procter & Gamble (PG) LT topline growth in the 4% range. In the US, a strong breadth of performance and share gains give us confidence that market share momentum is sustainable and supports LT topline growth above HPC peers. While near-term pressures from commodity/freight inflation will impact margins, we believe PG has stronger pricing power than peers, particularly with share gains,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

PG trades at ~22.5x CY22e EPS, an HSD% discount to HPC peers CLX, CL and CHD, and looks compelling given our call for higher LT PG growth.”

UNITED AIRLINES: The major U.S. airline company is expected to report a loss for the eight-consecutive time of $-2.12 in the holiday quarter as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions.

However, that would represent a year-over-year improvement of about 70% from -$7.0 per share seen in the same period a year ago. The Chicago, Illinois-based airlines would post revenue growth of over 130% to $7.94 billion.

“Despite some headwinds around staffing issues, we expect United Airlines (UAL) to guide to a continued sequential improvement with capacity guided to be down in the 17-18% range in Q1, which incorporates domestic capacity down in the 1% range, while international capacity remains down 27%,” noted Sheila Kahyaoglu, equity analyst at Jefferies.

“Remaining in a Net Loss Position into Q1. We expect a continued sequential decline in CASM-ex to 11.63¢, which reflect a 9% increase vs. 2019 levels, which compares to the 13% increase we expect in Q4. Nonetheless, UAL will remain in a net loss position in Q1, before turning positive in Q2.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 19

TICKER COMPANY EPS FORECAST
AA Alcoa $2.5
ASML ASML Holding $4.3
CFG Citizens Financial Group $1.16
CMA Comerica $1.6
DFS Discover Financial Services $3.48
FAST Fastenal $0.36
FUL H.B. Fuller $1.06
KMI Kinder Morgan $0.27
MS Morgan Stanley $1.83
PACW PacWest Bancorp $1.06
PG Procter & Gamble $1.66
STT State Street $1.93
USB U.S. Bancorp $1.13
UAL United Airlines $-2.12
WTFC Wintrust Financial $1.56

 

Thursday (January 20)

IN THE SPOTLIGHT: NETFLIX

The California-based global internet entertainment service company NetFlix is expected to report its fourth-quarter earnings of $0.82 per share, which represents a year-over-year decline of over 30% from $1.19 per share seen in the same period a year ago.

However, the streaming video pioneer would post revenue growth of over 16% to $7.71 billion. It is worth noting that the company has beaten earnings per share (EPS) estimates just thrice in the last two years.

“We believe share performance is highly dependent on increasing global membership scale. Proven success in the US and initial international markets provides a roadmap to success in emerging markets, and scale should allow Netflix (NFLX) to leverage content investments and drive margins,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“Higher global broadband penetration should increase the Netflix (NFLX) addressable market, driving member growth and providing further opportunity given NFLX’s global presence. Longer-term, we see the ability to drive ARPU growth, particularly given increased original programming traction.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 20

TICKER COMPANY EPS FORECAST
AAL American Airlines $-1.72
CSX CSX $0.42
FITB Fifth Third $0.91
ISRG Intuitive Surgical $1.01
KEY KeyCorp $0.56
MTB M&T Bank $3.24
NTRS Northern Trust $1.82
OZK Bank OZK $0.98
PPBI Pacific Premier Bancorp $0.85
PPG PPG Industries $1.2
RF Regions Financial $0.49
SASR Sandy Spring Bancorp $1.1
SIVB SVB Financial $6.29
TRV Travelers $3.77
UNP Union Pacific $2.66
WBS Webster Financial $1.11

 

Friday (January 21)

TICKER COMPANY EPS FORECAST
ALLY Ally Financial $2.0
FHB First Hawaiian $0.47
HBAN Huntington Bancshares $0.37
INFO IHS Markit $0.71
SLB Schlumberger $0.39

 

United Airlines Q4 Earnings to Improve; Omicron Spike A Risk For Aviation

The major U.S. airline company United Airlines is expected to report a loss for the eight-consecutive time of $-2.12 in the holiday quarter as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions.

However, that would represent a year-over-year improvement of about 70% from -$7.0 per share seen in the same period a year ago. The Chicago, Illinois-based airlines would post revenue growth of over 130% to $7.94 billion.

One of the biggest risks facing the airline industry is the rising number of cases of the new Omicron coronavirus. Since COVID-19 knocked the industry to its knees in 2020, American airlines have come a long way. But the pandemic still looms large.

A new wave of sickness caused by a highly contagious virus variant, the Omicron Coronavirus, has caused chaos for a short-staffed industry. In addition to an increase in daily sick calls, winter storms have led to mass flight cancellations, according to a Reuters report.

“Despite some headwinds around staffing issues, we expect United Airlines (UAL) to guide to a continued sequential improvement with capacity guided to be down in the 17-18% range in Q1, which incorporates domestic capacity down in the 1% range, while international capacity remains down 27%,” noted Sheila Kahyaoglu, equity analyst at Jefferies.

“Remaining in a Net Loss Position into Q1. We expect a continued sequential decline in CASM-ex to 11.63¢, which reflect a 9% increase vs. 2019 levels, which compares to the 13% increase we expect in Q4. Nonetheless, UAL will remain in a net loss position in Q1, before turning positive in Q2.”

United Airlines shares traded 0.34% higher in pre-market trading on Wednesday. The stock gained over 7% so far this year after rising just over 2% in 2021.

Analyst Comments

United Airlines (UAL) is our 2022 Best Idea. They should benefit from increased international leisure demand and continued strength in domestic leisure travel. Any business travel recovery would be a boon. We expect UAL to focus on paying down debt and improving its balance sheet while maintaining strong liquid it,” noted Helane Becker, equity analyst at Cowen.

“We are maintaining our Outperform rating on the common shares of United Airlines. We believe these shares can sell at 7x our preliminary 2023 EPS estimate of $11.18 or $78 /share. Our estimate is 47% greater than the $7.59 consensus. We attribute our optimism relative to the peer group to our view that international leisure destinations will outperform domestic beginning in summer 2022 and continue into 2023 and beyond.”

United Airlines Stock Price Forecast

Nine analysts who offered stock ratings for United Airlines in the last three months forecast the average price in 12 months of $60.00 with a high forecast of $78.00 and a low forecast of $42.00.

The average price target represents a 27.93% change from the last price of $46.90. From 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 under a bull scenario and $27 under the worst-case scenario. The firm gave an “Equal-weight” rating on the Airlines’s stock.

“Why Equal-weight? We like United Airlines’ (UAL) 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. BofA Global Research raised the price objective to $42 from $40. Bernstein cut the target price to $73 from $78. Raymond James lowered the target price to $75 from $78. Citigroup cut the price target to $64 from $67.

Technical analysis also suggests it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator gives mixed signals.

Check out FX Empire’s earnings calendar

Sector Themes In Play In The Markets For 2022

Years like 2021 saw a solid broad-based performance in many stock market sectors. Relatively simple approaches such as Indexing and Sector Rotation did well. But with macro changes in play and many uncertainties for 2022, we may very well see broad indexes underperforming while individual sectors dominated by a few stocks really shine.

Dips will continue to be bought unless something significant changes. But let’s not forget that we’re long overdue for a substantial correction. Significant risk catalysts are:

  • Fed actions.
  • International conflicts (i.e., Russia and China).
  • Pandemic developments that are not currently known.

There’s always the risk of the unknown – the literal definition of a “Black Swan” event. We shouldn’t get too complacent, knowing that we may need to get defensive to protect capital suddenly. When it’s time to be defensive, let’s not forget that CASH IS A POSITION!

Sector theme DRIVERS FOR 2022

Many uncertainties about Covid and the lingering effects on the economy remain. Inflation has roared back to 30-year highs. Strong employment numbers and consumer spending are fueling significant growth in corporate earnings. We also have a shift in bias at the Fed on interest rates and quantitative easing. These are the “knowns” and are theoretically priced in.

For these reasons and more, we should expect more of a “Stockpicker’s Market” in 2022. Certain sectors will do well and weather corrections better than the broader markets.

Even short-term traders can gain an edge by paying attention to what sectors are strongest. Traders tend to benefit most from playing the strongest stocks in the strongest sectors for bullish trades and choosing the weakest stocks in weaker sectors for bearish trades. That “tailwind” can make a significant difference in results.

Let’s look at some sector themes and individual names to keep an eye on in 2022.

ECONOMIC NORMALIZATION

A long-anticipated return to a “normal” economy will continue to be a theme — we just don’t know if that will be Post-Covid or Co-Covid. Or when. Air travel, theme parks, hotels, cruise lines, etc., have all suffered in the persistent Pandemic. What does seem to be changing is the idea of a “new normal” where virus variants may be with us for years to come. We will adjust socially and economically to that for the foreseeable future. DAL, UAL, LUV, AAL are airlines to watch, and the JETS ETF may be a good way to play a general recovery in this sector.

5G INTERNET

The much-hyped rollout of 5G network technology had its share of setbacks and technology disappointments. But 2022 should see the 5G deployment start to take off as technical issues are worked out, and the promise of widespread coverage with transformational performance becomes real. In the background supplying the 5G infrastructure are AMD, QCOM, ADI, MRVL, AMT, XLNX, and KEYS. Along with infrastructure and testing companies, shares of major carriers T, TMUS, and VZ languished for much of the second half of 2021 and looked poised for recovery in the coming year.

ARTIFICIAL INTELLIGENCE

In all its various forms (including autonomous vehicles), AI will remain a developing trend. Big players in the space to watch include MSFT, AMAT, GOOGL, NVDA, AAPL, and QCOM.

EVs and AUTONOMOUS VEHICLES

Electric Vehicles (EVs) are nearing an inflection point where widespread adoption is poised to take off. Technology and cost competitiveness has improved where some EVs will reach price parity with their traditional internal combustion counterparts.

While there are many smaller players in the EV space, automotive stalwarts F, GM, and TM are investing very heavily. TSLA has been grabbing the headlines, but many others want to stake out their territory in the space, including whole tiers of manufacturers and infrastructure enablers like WKHS, XPEV, NKLA, and CHPT.

MATERIALS and MINING

Gold, silver, and related miners underperformed for much of 2021 and now look poised for a recovery year as inflation, and monetary concerns grow. GLD, SLV, GDX, GDXJ, SIL, SILJ look good as both longer and mid-term plays. Metals and miners may get hit initially with a significant downturn in stocks but could ultimately demonstrate their safe-haven potential.

Specific to the growth in EVs, battery technology, etc., copper, lithium, and related basic materials should see stronger demand ahead. FCX looks particularly interesting as a dual play on gold and copper. LIT may be a good ETF play on lithium battery technology.

SEMICONDUCTORS

The market for chips is primed for exponential growth. EV’s have about ten times the number of specialty semiconductors as conventional vehicles. AI, crypto, 5G, mobile devices, and ubiquitous computing should drive growth in the semiconductor sector for some time to come.

REAL ESTATE

Real Estate and Homebuilders should continue to do well while employment numbers remain strong and if interest rates don’t rise too quickly. The inventory shortage in most real estate markets will likely persist well into the new year.

Storage REITs like PSA, LSI, and CUBE have been big winners in the Covid economy and still have room to run.

SUMMARY

Many sectors still look bullish after gains in 2021. But there are “storm clouds” on the horizon, and we must not take future performance for granted.

Lastly, one of the simplest ways to assess how sectors are measuring up is to watch the charts for the S&P SPDR series sector ETFs and a few others. Here are some notable ones to watch:

https://www.thetechnicaltraders.com/wp-content/uploads/2021/12/Dec-31-article.png

These can give us a good starting place to look for leading stocks in winning sectors as the year unfolds.

Let’s remain vigilant for possible market corrections and may the wind be at our backs!

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TheTechnicalTraders.com

 

Why Delta Air Lines Stock Is Under Pressure Today

Delta Air Lines Stock Is Losing Ground After Turbulent Weekend For Airlines

Shares of Delta Air Lines found themselves under pressure after flight cancellations during the Christmas weekend highlighted the risks posed by the spread of Omicron.

Most airlines blamed staffing shortages due to coronavirus for their problems. Not surprisingly, the whole sector is under pressure today, and other stocks like United Airlines, Southwest Airlines and JetBlue are also losing ground in today’s trading session.

It remains to be seen whether this problem will be a long-term one as Christmas weekend is one of the busiest periods for the airline industry, and the situation will likely normalize in the upcoming weeks. However, the disruptions highlighted risks posed by Omicron, and investors may remain worried about similar incidents in the future.

What’s Next For Delta Air Lines Stock?

Analysts expect that Delta Air Lines will report a loss of $4.28 per share in 2021 and a profit of $2.91 per share in 2022, so the stock is trading at roughly 13 forward P/E.

However, it should be noted that earnings estimates for 2022 have been steadily declining in recent months. The reason for this decline is simple – the situation with coronavirus is not improving, while the wave of Omicron boosted risks of additional restrictions, especially for the lucrative international travel segment.

It remains to be seen whether traders will rush to buy shares of Delta Air Lines and other airline stocks after the recent pullback. While airlines should quickly adapt to new challenges as they have a significant experience of dealing with various crises, falling earnings estimates may continue to put pressure on their stocks. The good news for investors is that there is no evidence of big problems on the demand side as pent-up demand for travelling stays strong despite risks posed by the spread of Omicron.

For a look at all of today’s economic events, check out our economic calendar.

Best Stocks, Crypto, and ETFs to Watch – Visa, Shiba Inu and SPDR S&P Retail ETF (XRT) in Focus

Fears of a March 2020 reprise will impact market sentiment and price action in the new trading week, as evidenced by big moves in COVID beneficiaries and casualties during Friday’s holiday-shortened U.S. session. A contrary strategy makes more sense at this point than chasing the fearful crowd, looking for fresh sell signals on pandemic cast-offs that include Peloton Inc. (PTON) and Zoom Video Communications Inc. (ZM) while waiting for tradable lows in travel and digital transaction plays, like United Airlines Holdings Inc. (UAL) and Visa Inc. (V).

Dow component Salesforce Inc. (CRM) is the third strongest performer in the venerable index, gaining nearly 28% year-to-date. The stock broke out earlier this month above the rally peak posted after the company joined the index in August 2020 and pulled back to test new support during Friday’s rout. Tuesday’s post-market earning report should decide whether or not the breakout is sustainable, with the company expected to post a profit of $0.92 per-share on $6.80 billion in revenue.

Crypto assets are under pressure along with growth stocks after the Omicron news, illustrated by Bitcoin 10%+ decline to a 7-week low on Friday. However, lowly Shiba Inu held above Wednesday’s low during that session and has continued to trade above short-term support near $0.00003800 over the weekend. This bullish divergence could come into play because that price level also marks support at the .618 Fibonacci retracement of the powerful uptrend between October 2020 and October 2021.

Brick and mortar retailers got sold aggressively ahead of Black Friday, with popular chains that include Nordstrom Inc. (JWN) and Gap Inc. (GPS) reporting weak margins and issuing cautious outlooks. Taken together with the COVID threat, SPDR S&P Retail ETF (XRT) could offer a low risk short sale opportunity with 10% to 20% short-term downside. Better yet, the fund just failed a breakout above the January peak near 100, potentially signaling a long-term top and significant change in trend.

The Natural Gas futures contract rose 8.48% on Friday while the Crude Oil contract fell more than 13%. This bullish divergence highlights growing shortages across Europe and Asia and the potential for the long-suffering commodity to break out above the 7-year high posted in October. Cheniere Energy Inc. (LNG) looks like an excellent way to play this long-term opportunity, with the stock trading at an all-time high after breaking out above 2014 resistance in the mid-80s in September.

For a look at this week’s economic events, check out our earnings calendar.

Disclosure: the author held Visa in a family account at the time of publication. 

Are Stock Bulls Back On A Track?

Earnings beats have actually been coming in at a wider margin than average, contrary to lingering fears that supply chain disruptions, material shortages, and climbing costs would lead to disappointing Q3 results.

Q3 Earnings

The big beats now have S&P 500 companies on track to post +30% earnings growth for Q3. Most Wall Street insiders are now expecting Q4 earnings to show right around +20% earnings growth.

Today’s earnings highlights include Albertsons and State Street. Some of the big names reporting later this week include Netflix, Haliburton, Johnson & Johnson, United Airlines, and Procter & Gamble on Tuesday; and Biogen, IBM, Verizon, and Tesla on Wednesday; American Airlines, AT&T, Chipotle, Intel, Snapchat, and Southwest Airlines on Thursday.

The following week is even more highly anticipated as many of the biggest names in the stock market will be reporting.

Economic data

In economic data today, Industrial Production for September is expected to dip due to a combination of Hurricane Ida and supply chain constraints. Supply chain challenges also likely lowered builder sentiment in the October NAHB Housing Market Index due today as well. The supply-side shortages of both materials and labor continue to weigh on economic growth outlooks for the last part of 2021.

However, most bullish analysts have adjusted their 2022 growth projections higher, believing lost growth this year will be made up next year. The labor market is expected to get a boost thanks partially to the dramatic decline in Covid cases, which are down nearly -50% since early-September.

The extreme worker shortage in some sectors has already led to rapid wage growth with hourly earnings in September up +4.6%, led by an increase of nearly +11% in leisure and hospitality. That is what’s considered “sticky” inflation, meaning that it is not likely going to be reversed.

Likewise for consumer goods’ prices that have been creeping higher as manufacturers try to offset higher costs. If wage growth can mostly keep pace with inflation, bulls will likely remain less concerned that rising prices will crush economic growth. In fact, Retail Sales released Friday showed no signs of consumer spending slowing down with sales climbing +15% in September, despite obviously higher costs for many goods. The thought of the economy heating back up quickly is both good and somewhat bad.

There now seems to be more talk on Wall Street about the likelihood of two rates hikes next year rather than just one. There’s actually even some talk of perhaps three rate hikes being possible in 2022, especially if the supply-chain complications continue to create higher prices and fuel higher inflation.

The biggest wildcard right now appears to be the global energy shortage which is already pushing up costs for both consumers and manufacturers and threatens to accelerate headline inflation far beyond wage growth.

Any energy “crisis” will likely only be temporary but it still potentially translates to several quarters of slower growth than many Wall Street bulls have been penciling. If it leads to a massive surge higher in inflation in the months ahead, it also could also pressure the Federal Reserve to pull forward its timeline to begin hiking interest rates.

Technical analysis

ES ##-## (Daily) 2021_10_18 (3_38_51 PM)

SP500 futures are testing daily MA50. With the strong accumulation in this market, I will not be surprised to see a base-building above moving average. If that happens, investors will gain more confidence. Thus, we can see money flowing aggressively into the stock market again. The weakness of the USD gives additional strength for indexes. In that case, bulls will target at least 4600 (important Gann level on a daily chart).

Breaking below 4250 is a game-changer. However, in the absence of bearish macroeconomic factors, we have more chances to see a bullish scenario.

Delta Air Lines’ Earnings To Swing to Positive Territory For First Time in Seven Quarters

Delta Air Lines’ earnings per share (EPS) is expected to swing back to positive territory for the first time in seven quarters on Wednesday, more than doubling to $0.16 per share compared to a huge loss of -$3.30 per share seen in the same period a year ago.

The Airline company, which provides scheduled air transportation for passengers and cargo throughout the United States and across the world, is forecast to report revenue growth of over 170% in the third quarter to around $8.4 billion. It is worth noting that in the last two years, the airline has beaten consensus earnings estimates just three times.

“Notably, all comparisons in percentage are made to third-quarter 2019. For the third quarter of 2021, the carrier expects capacity to decline in the 28-30% band from the number reported in third-quarter 2019. The carrier anticipates total revenues to drop in the 30-35% range from third-quarter 2019 actuals,” noted analysts at ZACKS Research.

“Non-fuel unit costs in third-quarter 2021 are expected to increase in the 11-15% band from the third-quarter 2019 actuals. Fuel price per gallon in the September quarter is projected in the $2.05-$2.15 range. Capital expenditures and adjusted net debt are likely to be around $800 million and $19 billion, respectively, in the September quarter.”

At the time of writing, Delta Air Lines’ was trading 0.98% lower at $43.25 on Friday. However, the stock rose over 7% so far this year.

Delta Air Lines Stock Price Forecast

Eighteen analysts who offered stock ratings for Delta Air Lines in the last three months forecast the average price in 12 months of $55.21 with a high forecast of $67.00 and a low forecast of $45.00.

The average price target represents a 27.39% change from the last price of $43.34. From those 18 analysts, nine rated “Buy”, nine rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $67 with a high of $96 under a bull scenario and $35 under the worst-case scenario. The firm gave an “Overweight” rating on the airline’s stock.

“Why Overweight? Delta Air Lines (DAL) has some of the strongest customer satisfaction numbers among the other Legacy peers, while also commanding a higher PRASM, making it our preferred Legacy carrier. While DAL cannot escape Legacy overhangs (delayed International/corporate recovery, strained balance sheet), it should rise with the industry tide. The risk-reward looks attractive,” noted Ravi Shanker, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. In July, Bernstein raised the target price to $65 from $64. In June, Jefferies lifted the price objective to $60 from $50. In April, Berenberg upped the price target to $48 from $40.

Analyst Comments

“Airlines will report 3Q21 results later this month, beginning Oct 13 with Delta Air Lines’ release. We believe 3Q21 started strong, sagged in the middle and then finished strong as people started planning holiday trips,” noted Helane Becker, equity analyst at Cowen.

“We believe 4Q21 guidance will reflect a strong peak, likely >2019 levels while off-peak is likely to lag 2019 levels. Stocks to own include United Airlines (UAL), Alaska Air Group (ALK), Allegiant Travel (ALGT) & Southwest Airlines (LUV).”

Check out FX Empire’s earnings calendar

Southwest Airlines Lowers Q3 Revenue Guidance

Southwest Airlines Co. (LUV) is trading lower on Wednesday after warning about Q3 2021 revenue due to “close-in’ cancellations and bookings as a result of the Delta variant. The news is bearish for the broader airline industry, for two reasons. First, it tells us that leisure travelers are having second thoughts about vacations and trips to see grandma while second, it defies predictions that widespread business travel would resume in the fourth quarter.

Red Flag for Airline Industry

The airline has outperformed its peers since March 2020, with a domestically-focused schedule avoiding the gauntlet of international travel restrictions. The recovery wave reached the 2018 peak in March 2021 before reversing, unlike American Airlines Group Inc. (AAL), United Airlines Holdings Inc. (UAL), and Delta Air Lines Inc. (DAL), which stalled well below similar levels. In turn, this raises odds that rivals will follow with identical warnings in coming weeks.

According to the release, Southwest “recently experienced a deceleration in close-in bookings and an increase in close-in trip cancellations in August 2021, which are believed to be driven by the recent rise in COVID-19 cases associated with the Delta variant. Based on the assumption that COVID-19 cases remain elevated in the near-term and current revenue trends in August continue into September, the current outlook for Q3 2021 operating revenues has worsened by an estimated three to four points.”

Wall Street Asleep at the Wheel

Wall Street consensus has ignored the Delta variant, with a ‘Buy’ rating based upon 16 ‘Buy’, 3 ‘Overweight’, and 4 ‘Hold’ recommendations. No analysts are recommending that shareholders reduce positions or move to the sidelines. Price targets range from a low of $57 to a Street-high $85 while the stock is set to open Wednesday’s session about $7 below the low target. This disconnect indicates that Main Street understands the current risks better than the analyst community.

Southwest posted an all-time high at 66.99 in December 2017 and entered a trading range that broke to the downside in February 2020, dropping the stock to a 6-year low. The subsequent uptick stalled within three points of that peak in April 2021, giving way to a correction that pieced the 200-day moving average in the 50s in July. Two tests at that level have failed while this morning’s decline is holding within a short-term trading range. Accumulation has dropped to a 52-week low, raising odds for continued downside into the lower 40s.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Stalling Signs? Taking a Look Under the Hood of US Equities

Greetings. I hope this article finds you and yours well. Today, we are taking a look at some additional market indicators and internals to get an unbiased perspective on things.

First, I want to preface things by mentioning that I am not suggesting that I am fully bearish on the S&P 500 or stocks right now. However, I am taking more of a cautious stance at the moment.

 

Figure 1 – S&P 500 Index April 15, 2021 – July 21, 2021, Daily Candles Source stockcharts.com

Nothing new to see here. Just another pedestrian pullback to the 50-day SMA and a bounce back. This pattern has repeated itself several times since the pandemic lows in the $SPX. It won’t repeat itself forever – that would be too easy.

Since it is earnings season, let’s talk earnings multiples.

Feeling bullish? It can be challenging to get excited about an $SPX at 4400 with an estimated 46.40 P/E ratio (trailing twelve months). We are in the middle of earnings season, so we will have a clearer figure soon.

Figure 2 – S&P 500 PE Ratio 1870 – July 22, 2021. Source multpl.com

Stocks are not cheap by any measure, folks. However, with easy monetary policy and low rates, this is to be expected. What could be the catalyst to derail this freight train?

How about the Dow Transports? This index used to be talked about much more frequently and is followed closely by students of Dow Theory. We just don’t hear much analysis about it on Fox Business, CNBC, or Bloomberg these days.

The Dow Transports (Dow Jones Transportation Average) $TRAN is an index comprised of 20 companies.

Here are the index components and weighting as of December 2020:

Alaska Air Group, Inc. 2.55%

American Airlines Group Inc. 0.76%

Avis Budget Group, Inc. 1.80%

C.H. Robinson Worldwide, Inc. 4.61%

CSX Corporation 4.39%

Delta Air Lines, Inc. 1.94%

Expeditors International of Washington, Inc. 4.61%

FedEx Corporation 13.10%

J.B. Hunt Transport Services, Inc. 6.70%

JetBlue Airways Corporation 0.70%

Kansas City Southern 9.73%

Kirby Corporation 2.51%

Landstar System, Inc. 6.60%

Matson, Inc. 2.79%

Norfolk Southern Corporation 11.42%

Ryder System, Inc. 3.12%

Southwest Airlines Co. 2.26%

Union Pacific Corporation 9.91%

United Airlines Holdings, Inc. 2.11%

United Parcel Service, Inc. 8.39%

Figure 3- Dow Jones Transportation Index January 4, 2021 – July 21, 2021, Daily Candles Source stockcharts.com

Here, and in contrast to the Dow Jones Industrial Average, we can see that the Transports topped back on May 10, 2021. Proponents of Dow Theory would argue that this creates a lack of confirmation and that the subsequent highs in the Dow Jones Industrial Average are not valid due to this lack of confirmation.

What could be the reason for the stall in the Transports? Input Costs? While fuel costs have risen, what about the rise in retail spending? Is the stimulus-powered consumer pocket not enough to counterbalance the rising input costs?

If input costs are the reason for the stalling, what about the other companies that rely on raw materials to make their products? Recent inflationary data has not affected these companies’ stock prices yet (for the most part).

What if the Fed eases off the gas pedal?

While it is very difficult (if not impossible) to pick market tops (and I don’t advocate trying to do that), it is wise to look at certain market indicators to get an understanding of what is going on beneath the surface.

It is easy to look at the chart of the $SPX and see that it is moving higher, from the bottom left-hand corner of the chart to the top right-hand corner. However, that does not tell the whole story of what is happening in the US equity markets.

We will be monitoring the above and previously mentioned market internals and indicators for more clues in the coming days, weeks, and months. I think it is critical to be aware of metrics such as the above as the broader indices trade near all-time highs.

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For a look at all of today’s economic events, check out our economic calendar.

Rafael Zorabedian
Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

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This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits’ employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.

United Airlines Shares Slump Ahead of Q2 Earnings

United Airlines shares slumped over 5% on Monday ahead of the second-quarter earnings results, where the major U.S. airline company is expected to report a loss for the sixth consecutive time of $4.21 as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions.

However, that would represent a year-over-year improvement of about 55% from -$9.31 per share seen in the same quarter a year ago. The Chicago, Illinois-based airlines would post revenue growth of over 250% to $5.25 billion, up from $1.48 billion a year ago.

Due to the ongoing COVID-19 crisis, the company reported losses in all four quarters, posting an average negative earnings surprises of 5.39%.

At the time of writing, United Airlines shares traded 5.19% lower at $43.60 on Monday.

United Airlines Stock Price Forecast

Fifteen analysts who offered stock ratings for United Airlines in the last three months forecast the average price in 12 months of $60.46 with a high forecast of $78.00 and a low forecast of $43.00.

The average price target represents a 36.94% change from the last price of $44.15. From those 15 analysts, four rated “Buy”, ten rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $70 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 Airlines’ stock.

Several other analysts have also updated their stock outlook. Jefferies lowered the target price to $50 from $55. Evercore ISI slashed the target price to $55 from $66. Bernstein increased the target price to $76 from $67. Cowen and company lifted the target price to $72 from $65. Berenberg upped the target price to $50 from $48.

Analyst Comments

“We like United Airlines (UAL) 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.”

Increase In Covid Cases Cause Airline Stocks To Plunge

The shares of some major airline companies in the United States are down at Monday’s pre-market trading session thanks to a surge in the number of Coronavirus cases in the country.

UAL, AAL And DAL All Trading In The Red

Delta Air Lines (DAL), American Airlines and United Airlines are all in a bearish mode today thanks to the news of a surge in the number of Covid cases in the United States. At Monday’s pre-market trading session, the shares of United Airlines are down by 5%, with American Airlines also down by roughly 5% at the time of this report.

UAL stock chart. Source: FXEMPIRE

Delta Air Lines is also not left out, as the stock is down by 4.1% over the past few hours. The companies’ stocks were performing excellently in recent weeks, thanks to the rapid vaccination program put in place by the Biden administration. Travel demand has increased in recent months, with the Transportation Security Administration recording over 2 million passengers at US airports yesterday. This is the highest Covid level recorded since February 2020, weeks before the pandemic hit the United States.

Delta Variant Is Spreading

The concern amongst travelers is the spread of the Delta variant of Covid-19. The Delta Covid variant has become the dominant strain in the United States, and this is affecting the broader stock market. However, travel and hospitality stocks are usually the most affected, with airlines and hotels suffering the most over the past few months.

Following the increase in the Delta variant, some regions in the United States are reinstating some of the earlier lifted restrictions. Los Angeles, for instance, has reinstated the indoor mask mandate while the Southern Nevada Health District is asking people to also wear masks indoors as the cases increase across the state.

AAL stock chart. Source: FXEMPIRE

Year-to-date, both American Airlines and United Airlines have performed excellently. AAL began the year trading at $15 per share, but it is now up by 20% and is currently trading above $18. UAL began the year trading at $41, but after a period of growth, it is now consolidating and trades just above the $43 mark.

Slide in Coronavirus-Sensitive Stocks Suggests Growing Worries over Delta Variant

Declines in the shares of companies tied to the reopening trade have broadly outpaced those of other so-called value stocks, which have been battered on worries that economic growth will be slower than expected in coming months.

Shares of cruise stocks Carnival Cruise Lines and Norwegian Cruise Line Holdings have slumped 10% and 9%, respectively, in July, while American Airlines Group dropped 4% and United Airlines Holdings was off 5%. MGM Resorts International has fallen 5.5%, while Expedia Group has dropped 1.3%.

The Russell 1000 value index, which includes economically sensitive stocks, has fallen by 0.9% in the same time frame, while the S&P 500 has risen 0.5% in July.

“There is a lot of uncertainty and I think the market is trying to add up how much risk this poses to global supply chains and activity down the road,” said Steve Englander, head of North America macro strategy at Standard Chartered.

Since July 1, a basket of coronavirus-sensitive stocks tracked by Standard Chartered is down 7.3%, and off 9.4% relative to a group of tech and other stocks that outperformed during the pandemic last year.

The yield on the benchmark 10-year Treasury note has dropped about 20 basis points to 1.29% this month and was falling for an eighth straight session, marking the longest streak since a nine-session drop that ended on March 3, 2020, as the COVID-19 pandemic in the United States was gaining speed.

The availability of vaccines – including their apparent ability to keep even those infected from developing serious complications – suggests that the extent of the shutdown measures last year to control the virus will not be required.

Still, some regions, including those without as much access to vaccines, are grappling with rising cases or putting restrictions in place. Cases are rising in places such as Spain and England, although the British government plans to reopen the economy later this month.

In Australia, Sydney has had a strict stay-at-home order in force since late last month, while Japan on Thursday declared a state of emergency in Tokyo, putting restrictions in place through Aug. 22. The pullback in coronavirus-sensitive stocks likely stems in part from concerns the variant spread could restrict travel and slow growth, said Walter Todd, chief investment officer at Greenwood Capital in South Carolina. But those stocks may have been due for a decline after such a sharp run, he said. “A lot of these stocks moved quite significantly off the vaccine news,” Todd said. “Part of this is concern about the re-emergence of this variant, but also just the fact … you are giving some back.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili, Dan Grebler and Peter Cooney)

 

Delta Air Lines Shareholders Hit the Exits

Delta Air Lines Inc. (DAL) reports Q2 2021 earnings next week, with analysts expecting the carrier to post a loss of $1.43 per-share on $6.19 billion in revenue. If met, the loss-per-share would mark less than one-third of the red ink posted in the same quarter last year, which included the exit from the first lockdown. The stock dropped more than 10% in the week following April’s Q1 release, fueled by much-worse than expected earnings.

Business Travel Still Weak

The U.S. Transportation Security Administration screened 2,196,411 travelers on Friday July 2nd, higher than the 2,088,760 passing through those gates on the same day in 2019. Even so, Delta and other airlines sold off when they started the new trading week because leisure travelers comprised the vast majority of those bookings rather than business travel, which United Airline Holdings Inc. (UAL) recently reported as 60% lower than pre-pandemic levels.

Airlines are highly dependent on business travel and are waiting patiently for their return.  However, many analysts believe this segment will remain depressed for several years due to the lower cost of Zoom and other virtual meeting spaces. Not everyone agrees with this somber analysis, as evidenced by a recent industry-wide Wolfe Research upgrade, who is forecasting additional upside driven by a late summer business travel surge.

Wall Street and Technical Outlook

Wall Street consensus has grown more bullish in the last three months, posting an ‘Overweight’ rating based upon 12 ‘Buy’, 1 ‘Overweight’, and 9 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $44 to a Street-high $73 while the stock is set to open Wednesday’s session on top of the low target. This humble placement suggests high levels of skepticism about Delta’s long-term outlook.

Delta topped out above 60 in January 2018 and failed four breakout attempts into 2020. It fell to a 7-year low during the pandemic decline and bounced in a rising channel that lost steam after mounting the 200-day moving average and reaching the .786 Fibonacci selloff retracement level in March 2021. The pullback into July has bounced along a trading floor at 43 while accumulation has dropped to a 9-month low. Sellers could easily take control in this bearish scenario, filling the Nov. 6 gap between 32 and 35.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

United Airlines Could Post Weak Returns into 2022

United Airlines Holdings Inc. (UAL) has gone on a buying binge, procuring 270 new Boeing Co. (BA) and Airbus SE (EADSY) aircraft in the largest single order in airline history and the biggest by one carrier in the last ten years. In addition, CEO Scott Kirby just told CNBC the carrier will purchase one new aircraft every three days until 2023. Both transactions reflect growing optimism that airline travel is rapidly returning to pre-pandemic levels.

Business Travel Still Lagging

U.S. airline travel is booming in the summer of 2021 thanks to vaccinations but many foreign nations are still restricting access, weighing on quarterly revenues. In addition, the vast majority of current travelers are headed into vacations rather than business meetings, which are still being conducted through Zoom and other virtual meeting places. It’s wise to assume at this point that corporations have noticed they can significantly cut expenses using this digital channel.

Kirby expressed cautious optimism but admitted it will take 18 months for Asia to recover due to ongoing restrictions and Delta variant hotspots. He noted that business travel remains down 60% compared to 2019 but points out it stood above 90% just “weeks ago”. Chief Commercial Officer Andrew Nocella expressed similar optimism before his boss’s comments, insisting that “What you’re seeing in the marketplace is that as people travel more for leisure, the resistance to traveling for business is rolling back quickly.”

Wall Street and Technical Outlook

Wall Street consensus remains cautious despite the travel surge, with an ‘Overweight’ rating based upon 8 ‘Buy’, 2 ‘Overweight’, 9 ‘Hold’, 1 ‘Underweight’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $43 to a Street-high $78 while the stock barely budged after the news and is set to open Tuesday’s session about $13 below the median $65 target. This placement reveals continued skepticism about United’s long-term outlook.

United posted an all-time high at 97.85 in December 2018 and dropped into a narrow sideways pattern that broke to the downside in February 2020, dropping to an 8-year low. The subsequent uptick eased into a rising channel, stalling at the 50% selloff retracement and 50-week moving average in March 2021. The stock has been drifting sideways since that time, not reacting to the travel uptick. This apathy could persist, yielding weak returns into the first quarter of 2022.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

United Airlines Closes in On $30 Billion Post-Pandemic Jet Order

By Tim Hepher, Tracy Rucinski and Eric M. Johnson

The order could include up to 200 Boeing 737 MAX and some 70 Airbus A321neo which competes with the top end of the MAX family for single-aisle trips needing most range.

Such a deal would notionally be worth $33 billion at the most recently published list prices, but analysts say airlines typically pay less than half price for deals of this size.

None of the parties commented ahead of an announcement expected at a United investor event on Tuesday. Negotiations are complex and numbers of units can shift, the sources cautioned.

The deal would be the industry’s biggest since the coronavirus pandemic pummelled air traffic and airline balance sheets, eclipsing recent orders for more than 100 MAX from Southwest Airlines.[

It would accelerate a recovery for the MAX which has been logging orders to rebuild momentum damaged by a safety crisis even before COVID-19. A 2019 draft order for 200 MAX from British Airways owner IAG was never finalised.

However, it would not resolve a strategic stalemate which has seen Airbus dominate the busy market for larger single-aisle jets while Boeing relies heavily on demand for its core MAX 8.

A split order would highlight widespread concerns that the MAX “can’t solve the whole problem”, one industry source said. Airlines also have to consider availability when buying.

Such an announcement “could mean only two versus three cheers for Boeing” since the A321neo remains “Boeing’s nemesis at the top end of the narrowbody market with a dominant market share,” Vertical Research Partners analyst Rob Stallard wrote.

United is considered one of the industry’s most influential buyers, whose whopping purchases can set the tone for decades.

A shock Airbus win there in 1992 led to the launch of the most-sold generation of Boeing 737, the 737NG. Boeing hit back with a major win for its successor, the 737 MAX, in 2012.

Reuters reported this month that the MAX portion of the latest order could involve as many as 200 aircraft.

The deal would come days after the first flight of the 737 MAX 10, the largest member of the MAX family of which United has 100 on order.

The MAX 10 was launched in 2017 to strengthen the top end of the portfolio following disappointing sales of the MAX 9, but Boeing continues to lag Airbus in the key long-range niche.

Boeing is now studying a new model to replace the out-of-production 757, which overlaps with the A321neo and MAX 10, but is not expected to decide before 2023 as it ponders how to produce the pair of jets as cheaply as possible.

(Reporting by Tim Hepher, Tracy Rucinski, Eric M. Johnson; Editing by Kirsten Donovan)

United Airlines in Talks to Buy at Least 100 Boeing 737 Max Jets – Bloomberg News

The carrier is looking to upgrade its fleet and study several new, fuel-efficient models at a time when the likes of Boeing and Airbus SE are hungry for deals while demand for leisure travel has been surging in the United States, the report said https://bloom.bg/3izdUZQ, citing people familiar with the discussions.

Boeing‘s portion of the order could include 150 Max, Bloomberg News added.

“We do not currently have a deal in place with Boeing or Airbus to purchase new aircraft and do not comment on speculative aircraft orders,” United spokesperson Luke Punzenberger said.

In March, the airline had ordered 25 new Boeing 737 MAX aircraft, as it prepares to replace aging jets and meet post-pandemic demand growth.

Bookings for U.S. airlines are expected to rebound this year on the back of speedy COVID-19 vaccination programs and easing restrictions after the pandemic caused one of the industry’s worst downturns in 2020.

Boeing said the company does not comment on customer discussions.

The planemaker has been offering some customers steep discounts, reduced upfront payments and other inducements that may not be available once global air traffic returns to more normal levels, the report said.

Reuters last month reported that Boeing had drawn up preliminary plans for a fresh sprint in 737 MAX output to as many as 42 jets a month in fall 2022.

(Reporting by Radhika Anilkumar and Kanishka Singh in Bengaluru; Editing by Sherry Jacob-Phillips)

Israel Looks to Back-Up Airport as Flight Cancellations Mount

By Sarah Young and Dan Williams

Palestinian militants have repeatedly shelled the Tel Aviv area during hostilities that erupted on Monday, raising safety concerns over Ben Gurion Airport, Israel’s main airport, and prompting it to reroute some flights to Ramon Airport, some 200 km (125 miles) to the south, which serves Eilat.

“The safety and security of our colleagues and customers is always our top priority, and we continue to monitor the situation closely,” British Airways said after cancelling its flights to and from Ben Gurion for Thursday.

Hamas militants in Gaza said they had launched a rocket at Ramon Airport on Thursday, but the Israel Airports Authority said that no rocket had struck Ramon and that it was operating as normal. The airport, which opened in 2019, can handle about 2 million passengers a year. It is connected by bus routes to the north, although there is no train service.

Its arrivals board showed several El Al Israel Airlines Ltd. flights from abroad that had been originally scheduled to land at Ben Gurion.

An Israeli official said the two airports were operating in sync. Ben Gurion was handling cargo, private and some other flights, and Ramon is “open for landing international commercial flights” and running scheduled domestic flights, he said.

Social media carried footage, purportedly taped by a passenger on an El Al flight from Brussels that was the first plane rerouted to Ramon, showing the view through the window of rockets being fired and intercepted over Tel Aviv. Reuters could not independently verify the footage.

UK-based Virgin Atlantic cancelled its flights to Tel Aviv for Wednesday and Thursday.

Spanish airline Iberia also cancelled its flight to Tel Aviv from Madrid on Thursday and back on Friday a spokeswoman said, while Germany’s Lufthansa also cancelled its flights.

“Due to the current situation in Israel, Lufthansa is suspending its flights to Tel Aviv until Friday, May 14,” the airline said.

Wizz Air said it had delayed its Thursday flight from Abu Dhabi to Tel Aviv until Friday.

Emirati carrier Flydubai said it was continuing to operate daily flights from Dubai to Tel Aviv. The airline was scheduled to operate three flights on Thursday, its website showed, while a fourth, night-time flight was cancelled.

United Airlines, Delta Air Lines and American Airlines on Wednesday all cancelled flights between the United States and Tel Aviv.

Virgin Atlantic had said earlier this week that bookings to Israel had soared 250% week on week after an announcement by Britain that Israel was on its “green list” for the reopening of overseas leisure travel during the COVID-19 pandemic.

But an explosion of violence, with fighting in Jerusalem and the Gaza Strip causing mounting civilian deaths, have made international airlines wary of the region.

Israel’s national airline El Al has said it was ready to operate additional planes to make up for shortfalls in foreign carriers.

British airline easyJet said that it was not yet cancelling its flights to Tel Aviv. Its next flight there is from Berlin and not scheduled until May 16, with a service from London Luton to Tel Aviv scheduled for May 18.

(Reporting by Sarah Young; Additional reporting by Inti Landauro in Madrid, Christoph Steitz in Frankfurt and Alexander Cornwell in Dubai; Editing by Michael Holden, Carmel Crimmins and Hugh Lawson)

Why Shares Of United Airlines Are Down By 10% Today?

United Airlines Video 20.04.21.

United Airlines Stock Dives As Traders Expected Stronger Outlook

Shares of United Airlines gained strong downside momentum after the company released its quarterly earnings report. The company reported revenue of $3.2 billion and GAAP loss of $4.29 per share, beating analyst estimates on revenue and missing them on earnings.

The company noted that Total Revenue Per Available Seat Mile (TRASM) will be down by 20% in the second quarter of 2021 compared to the second quarter of 2019. United Airlines expects that second quarter 2021 capacity would be down by about 45% compared to the second quarter of 2019.

The company also stated that business and long-haul international demand were down by 70% compared to 2019 levels. It looks that concerns about the recovery of the international demand have put serious pressure on the whole sector today as other airline stocks also found themselves under significant pressure.

What’s Next For United Airlines?

United Airlines stock had a strong start of this year so expectations were high. The market did not expect strong performance in the first quarter of this year, but traders hoped for a solid outlook for the next quarters.

Unfortunately, continued problems with coronavirus around the world have put serious pressure on the recovery of the international travel. Business travel remains under pressure as well as many companies have adapted to new reality by using video conference software.

While the recovery of the domestic segment may be robust thanks to the successful mass vaccination program in the U.S., the company will not be able to get closer to its pre-pandemic peformance without the recovery of the international segment.

In this light, news about coronavirus-related restrictions around the world ahead of the summer season will likely serve as a major catalyst for shares of United Airlines and other airline stocks. If the situation gets better and international travel begins to recover, United Airlines stock will have a good chance to get closer to recent highs.

For a look at all of today’s economic events, check out our economic calendar.

United Airlines Shares Slump on Deep Quarterly Loss; Analysts Optimistic on Recovery

United Airlines reported a worse-than-expected loss in the first quarter as the COVID-19 pandemic continues to hammer air travel demand amid higher fuel costs, sending its shares down over 2% in extended trading on Monday.

Chicago, Illinois-based airline reported a first-quarter 2021 net loss of $1.4 billion, adjusted net loss of $2.4 billion, missing Wall Street consensus estimates for the loss of $2.23 billion. The company’s total operating revenue plunged 66% y/y to $3.2 billion. United lost $7.50 a share during the first quarter, worse than analysts’ expectations for a loss of $6.98 per share.

United Airlines forecasts total revenue per available seat mile (TRASM) to be down about 20% in the second quarter 2021 versus the second quarter 2019. Expects the second quarter 2021 capacity to be down around 45% versus the second quarter 2019 and operating expenses excluding special charges4 to be down nearly 32%.

Fuel price per gallon estimated to be approximately $1.83 in the second quarter.

“We’ve shifted our focus to the next milestone on the horizon and now see a clear path to profitability. We’re encouraged by the strong evidence of pent-up demand for air travel and our continued ability to nimbly match it, which is why we’re as confident as ever that we’ll hit our goal to exceed 2019 adjusted EBITDA margins in 2023, if not sooner,” said United Airlines CEO Scott Kirby.

United Airlines shares slumped over 2% to $53.80 in extended trading on Monday. The stock plunged over 50% last year.

Analyst Comments

“Higher than anticipated payroll and maintenance costs resulted in a below expectation1Q21 EPS result. Yield and load factor are outpacing our expectations slightly while the company is being conservative with capacity. Management believes United can reach EBITDA and net income b/e with business/international long-haul demand down as much as 70% y/y2 and 35% y/y2, respectively,” noted Helane Becker, equity analyst at Cowen and Company.

United shares are flat to down in the after-hours trading session on mixed results as slightly higher than expected revenue, compared to our estimate, was more than offset by larger payroll and maintenance costs. The company is deploying incremental capacity to markets where it sees pent-up demand and anticipates positive EBITDA margins later this year. Management’s commentary calls for positive EBITDA and net income with business/long-haul international demand down as much as 70% and 35%, respectively, vs 2019 levels. While the comments were likely made to show where breakeven can occur during the recovery, investors may be interpreting them as an expectation that it will take longer than anticipated for business and international travel to recover fully.”

United Airlines Stock Price Forecast

Fourteen analysts who offered stock ratings for United Airlines in the last three months forecast the average price in 12 months of $63.83 with a high forecast of $74.00 and a low forecast of $54.00.

The average price target represents a 16.08% increase from the last price of $54.99. Of those 14 analysts, seven rated “Buy”, six rated “Hold” while one 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. 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,” noted Ravi Shanker, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Cowen and company raised the stock price forecast to $65 from $53. Raymond James upped the target price to $80 from $60. JP Morgan lifted the price target to $58 from $43. Citigroup increased the price objective to $67 from $54. Jefferies raised the target price to $60 from $55.

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