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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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.

Check out FX Empire’s earnings calendar

Earnings to Watch Next Week: Coca-Cola, United Airlines, NetFlix and SVB Financial in Focus

Earnings Calendar For The Week Of April 19

Monday (April 19)

IN THE SPOTLIGHT: COCA-COLA, UNITED AIRLINES

COCA-COLA: The world’s largest soft drink manufacturer is expected to report its first-quarter earnings of $0.50 per share, which represents a year-over-year decline of about 2% from $0.51 per share seen in the same quarter a year ago.

The company’s revenue growth to be flat at $8.6 billion. However, in the last two years, on average, Coca-Cola has beaten revenue estimates over 70% and earnings estimates of nearly 90%.

Coca-Cola, which has still not seen a full recovery to its pre-COVID-19 level, may be a decent investment opportunity at the moment. The stock traded around $60 pre-COVID in February 2020 and is 11% below that level. However, the stock has gained 40% since its March lows of $37, following the Fed’s stimulus package and measures announced by other economies. The gradual lifting of lockdowns and successful vaccine rollout has further enthused markets in anticipation of faster economic recovery,” noted analysts at TREFIS.

“However, the stock is unlikely to surpass its pre-Covid level anytime soon, as most of its business depends on demand from people going to entertainment venues, sporting events, etc. These locations are not yet fully operational in most parts of the world. With the recent spike in Covid cases, there are some forms of lockdowns imposed again in certain economies, thus slowing the recovery in demand. Therefore, in the absence of another complete lockdown (as was seen in 2020) and implementation of the vaccination program the stock is likely to rise, but full recovery to February 2020 levels looks unlikely in the near term. KO stock has a potential upside of about 10%.”

UNITED AIRLINES: One of the largest airlines in the world is expected to report a loss for the fifth consecutive time of $6.91 in the first quarter of 2021 on April 19 as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and renewed travel restrictions.

That would represent a year-over-year decline of over 168% from -$2.57 per share seen in the same quarter a year ago. The Chicago-based airline’s revenue would decline about 60% to around $3.3 billion.

“Most of the US airlines will report 1Q21 earnings the week of April 19 and 26. We expect the focus to be on higher fuel costs, the nascent traffic recovery, and improving the balance sheet. Our focus remains on domestic leisure airlines while watching borders reopening to determine recovery for international traffic. We also expect airlines to talk about repairing their balance sheet,” said Helane Becker, equity analyst at Cowen and Company.

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

Ticker Company EPS Forecast
KO Coca-Cola $0.50
PLD ProLogis $0.37
MTB M&T Bank $3.00
ONB Old National Bancorp $0.41
UAL United Airlines Holdings -$6.98
CCK Crown $1.37
STLD Steel Dynamics $1.84
ZION Zions Bancorporation $1.18
PNFP Pinnacle Financial Partners $1.43
ACC American Campus Communities $0.15
HXL Hexcel -$0.16
WTFC Wintrust Financial $1.40
FNB FNB $0.25
SFBS ServisFirst Bancshares $0.95
HDS HD Supply Holdings $0.39
IBM IBM $1.68
EIDX Eidos Therapeutics Inc -$0.80
LII Lennox International $1.25
CDNS Cadence Design Systems $0.74

 

Tuesday (April 20)

IN THE SPOTLIGHT: NETFLIX

The California-based global internet entertainment service company is expected to report its first-quarter earnings of $2.97 per share, which represents year-over-year growth of over 90% from $1.57 per share seen in the same quarter a year ago. The streaming video pioneer would post revenue growth of over 23% to around $7.15 billion.

“We expect paid net adds to be in line with guide, helped in part by ongoing COVID shutdowns in some markets. Our view is supported by our positive 1Q survey data, which implies NFLX continues to lead living room TV apps. We also view the 45% of survey respondents who share passwords as a LT opp’ty for incremental subs. Reiterate Outperform & $675 Price Target,” noted John Blackledge, equity analyst at Cowen and Company.

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

Ticker Company EPS Forecast
ABF Associated British Foods £17.31
XRX Xerox $0.29
AN AutoNation $1.85
DOV Dover $1.45
JNJ Johnson & Johnson $2.33
PG Procter & Gamble $1.19
ABT Abbott $1.27
PM Philip Morris International $1.40
LMT Lockheed Martin $6.31
DANOY Danone PK $0.46
TRV Travelers Companies $2.38
FITB Fifth Third Bancorp $0.69
EDU New Oriental Education Tech $0.06
NTRS Northern $1.49
KEY KEY $0.47
OMC Omnicom $1.13
CMA Comerica $1.38
SNV Synovus Financial $0.93
HOG Harley Davidson $0.90
IRDM Iridium Communications -$0.05
MAN ManpowerGroup $0.67
WBS Webster Financial $0.90
GATX GATX Corp $0.89
SFNC Simmons First National $0.52
BMI Badger Meter $0.42
NFLX Netflix $2.97
ISRG Intuitive Surgical $2.64
CSX CSX $0.96
EW Edwards Lifesciences $0.47
WRB W.R. Berkley $0.83
IBKR Interactive Brokers $0.87
THC Tenet Healthcare $0.73
HWC Hancock Whitney Corp $0.97
UCBI United Community Banks $0.64
FULT Fulton Financial $0.35
FMBI First Midwest Bancorp $0.37
EMR Emerson Electric $0.89
PCAR PACCAR $1.29
TER Teradyne $1.04
ENTG Entegris $0.72
CIT CIT $0.98
AVNT Avient Corp $0.71
ELS Equity Lifestyle Properties $0.35
PACW Pacwest Bancorp $0.91
BECN Beacon Roofing Supply $0.08

 

Wednesday (April 21)

IN THE SPOTLIGHT: SIGNATURE BANK

The New York-based full-service commercial bank is expected to report its first-quarter earnings of $2.85 per share, which represents year-over-year growth of over 50% from $1.88 per share seen in the same quarter a year ago. The bank would post revenue growth of about 18% to around $428 million.

SBNY has a unique business model, with its single-point-of-contact bankers, excellent credit culture, and a highly efficient operating structure. Its loan growth continues to outpace peers, given its relatively new focus on growing its PE/VC capital call lending business, while strategically de-emphasizing its NYC MF portfolio,” Ken Zerbe, equity analyst at Morgan Stanley.

“While we do expect losses in SBNY’s CRE portfolio, we believe the market is overly discounting this in the stock price, particularly given its strong underwriting history and conservative lending.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE APRIL 21

Ticker Company EPS Forecast
HCSG Healthcare Services $0.27
ERIC Ericsson $0.11
TEL TE Connectivity $1.48
NDAQ Nasdaq Omx $1.72
RCI Rogers Communications USA $0.53
BKR Baker Hughes Co $0.11
HAL Halliburton $0.17
RANJY Randstad Holdings $0.46
SBNY Signature Bank $2.85
FHN First Horizon National $0.35
KNX Knight Transportation $0.70
BOKF BOK Financial $1.92
NEP Nextera Energy Partners $0.33
FCFS FirstCash $0.70
ASML ASML $3.06
NEE NextEra Energy $0.58
ANTM Anthem $6.38
LAD Lithia Motors $4.74
CP Canadian Pacific Railway USA $4.35
CACI Caci International $3.68
CMG Chipotle Mexican Grill $4.89
KMI Kinder Morgan $0.24
DFS Discover Financial Services $2.81
WHR Whirlpool $5.04
GGG Graco $0.50
GL Globe Life Inc $1.63
SLM SLM $1.05
REXR Rexford Industrial Realty $0.06
LSTR Landstar System $1.63
FR First Industrial Realty $0.24
RLI RLI $0.66
VMI Valmont Industries $1.92
SLG SL Green Realty -$0.14
UFPI Universal Forest Products $0.87
UMPQ Umpqua $0.44
TCBI Texas Capital Bancshares $1.09
BXS BancorpSouth $0.63
SNBR Scs Group Plc $1.85
CNS Cohen & Steers $0.76
RUSHA Rush Enterprises $0.52
PLXS Plexus $1.25
TBK Triumph Bancorp $0.91
BDN Brandywine Realty $0.02
EFX Equifax $1.53
LRCX Lam Research $6.60
CCI Crown Castle International $0.53
STL Sterling Bancorp $0.46
CHDN Churchill Downs $0.64
NWE Northwestern $1.12
RHI Robert Half International $0.80
SEIC SEI Investments $0.88
CVBF CVB Financial $0.37
LVS Las Vegas Sands -$0.27
PKX Posco $2.22
URI United Rentals $3.08
BZLFY Bunzl plc $0.15
ELISA Elisa Oyj €0.51

 

Thursday (April 22)

IN THE SPOTLIGHT: SVB FINANCIAL

The parent of Silicon Valley Bank is expected to report its first-quarter earnings of $6.47 per share, which represents year-over-year growth of about 153% from $2.55 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 45%. The Santa Clara, California-based company would post revenue growth of over 50% to about $1.24 billion.

SIVB is one of the fastest-growing banks in our coverage universe, with an average of 20%+ loan and deposit growth annually since 2010, with the growth driven by its unique niche of lending to the technology and life sciences industries, including PE and VC capital call lines. While we expect growth to slow, we still see low-teens loan growth (well above peers) for the next several years,” noted Ken Zerbe, equity analyst at Morgan Stanley.

“We are Equal-weight the shares due to valuation. SIVB is trading at just over 20x forward earnings and more than 10 P/E points above its peers (versus a 4-6x multiple premium that we believe it deserves). SIVB‘s earnings are highly sensitive to changes in Fed funds. Rate increases would drive higher EPS.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE APRIL 22

Ticker Company EPS Forecast
WSO Watsco $0.88
LUV Southwest Airlines -$1.88
VLO Valero Energy -$1.56
AAL American Airlines -$4.18
HCA HCA $3.31
SAP SAP $1.21
GPC Genuine Parts $1.14
FRME First Merchants $0.78
NUE Nucor $3.07
FCX Freeport-McMoran $0.51
PNR Pentair Ordinary Share $0.61
ALK Alaska Air -$3.68
SASR Sandy Spring Bancorp $1.02
ORI Old Republic International $0.46
DOW Dow Chemical $1.10
DHR Danaher $1.74
WNS Wns Holdings $0.69
FAF First American Financial $1.31
RS Reliance Steel & Aluminum $3.55
T AT&T $0.78
UNP Union Pacific $2.08
TPH Tri Pointe Homes $0.47
TAL TAL International -$0.23
HBAN Huntington Bancshares $0.32
AEP American Electric Power $1.18
BIIB Biogen $5.02
DHI DR Horton $2.18
EWBC East West Bancorp $1.25
BX Blackstone $0.75
DGX Quest Diagnostics $3.74
POOL Pool $1.14
ALLE Allegion $1.02
CLF Cliffs Natural Resources $0.35
TSCO Tractor Supply $0.97
TRN Trinity Industries $0.06
MKTX MarketAxess $2.12
BKU BankUnited $0.74
SNA Snap-On $3.03
IQV IQVIA Holdings Inc $1.85
SON Sonoco Products $0.86
ODFL Old Dominion Freight Line $1.58
SKX Skechers USA $0.49
INDB Independent Bank $1.09
HTH Hilltop $1.01
CE Celanese $2.98
OZK Bank Ozk $0.86
FFBC First Financial Bancorp $0.47
CSL Carlisle Companies $0.68
SAM Boston Beer $2.60
STX Seagate Technology $1.33
VICR Vicor $0.19
WWE World Wrestling Entertainment $0.20
ABCB Ameris Bancorp $1.13
ARI Apollo Commercial Real Est Finance $0.33
GBCI Glacier Bancorp $0.75
SBCF Seacoast Banking Of Florida $0.48
VRSN Verisign $1.34
MAT Mattel -$0.34
WSFS Wsfs Financial $0.86
SNAP Snap -$0.21
SIVB SVB Financial $6.47
ASB Associated Banc $0.43
FE FirstEnergy $0.69
ADS Alliance Data Systems $3.21
CTXS Citrix Systems $1.42
PBCT People’s United Financial $0.34
CAJ Canon $0.27
WST West Pharmaceutical Services $1.42
NVR NVR $61.90
FFIN First Financial Bankshares $0.37
VVV Valvoline Inc $0.37
SAFE 3 Sixty Risk $0.33
ASR Grupo Aeroportuario Del Sureste $23.55
ORAN Orange $0.24
INTC Intel $1.14
KPELY Keppel Corporation $0.14
SAVE Spirit Airlines -$2.55
CS Credit Suisse -$0.40

 

Friday (April 23)

Ticker Company EPS Forecast
SXT Sensient Technologies $0.75
ALV Autoliv $1.43
SLB Schlumberger $0.18
AXP American Express $1.60
KMB Kimberly Clark $1.93
HON Honeywell International $1.80
RF Regions Financial $0.47
GNTX Gentex $0.49
E ENI $0.42

 

United Airlines Q1 Earnings to Decline Over 168%

United Airlines Holdings, one of the largest airlines in the world, is expected to report a loss for the fifth consecutive time of $6.91 in the first quarter of 2021 on April 19 as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and renewed travel restrictions.

That would represent a year-over-year decline of over 168% from -$2.57 per share seen in the same quarter a year ago. The Chicago-based airline’s revenue would decline about 60% to around $3.3 billion.

“Most of the US airlines will report 1Q21 earnings the week of April 19 and 26. We expect the focus to be on higher fuel costs, the nascent traffic recovery, and improving the balance sheet. Our focus remains on domestic leisure airlines while watching borders reopening to determine recovery for international traffic. We also expect airlines to talk about repairing their balance sheet,” said Helane Becker, equity analyst at Cowen and Company.

United Airlines Holdings in its filing with the U.S. Securities and Exchange Commission (SEC) on Monday, April 12, said it expects revenue to slump 66% to $3.2 billion in the first quarter of 2021.

However, United Airlines shares, which slumped more than 50% last year, rebounded over 29% so far this year.

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 13.46% increase from the last price of $56.26. 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 billion 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. Cowen and Company lifted the target price to $65 from $53. Raymond James raised the target price to $80 from $60. JP Morgan increased the price objective to $58 from $43. Citigroup upped the price target to $67 from $54. Jefferies lifted the target price to $60 from $55.

Analyst Comments

United Airlines along with its peers, American and Delta, have revised their full-year outlook with a likelihood of positive cash generation in summer. Assisted by the government’s payroll support program, United reported just $4 billion of operating cash outflow in 2020 – fairly lower than the $6.5 billion drop in the stock’s market capitalization,” noted analysts at TREFIS.

“Positive sentiment surrounding a quicker than anticipated recovery in travel demand has pushed UAL stock from $40 in early January to $58 at present. However, the risks associated with a fourth wave of the pandemic triggered by new virus strains remain a concern. Thus, Trefis believes that the stock is fairly valued.”

Check out FX Empire’s earnings calendar

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%.”

Check out FX Empire’s earnings calendar

Frontier CEO Says Now Making Money with Low Fares in Pandemic as Stock Debuts

By Tracy Rucinski

The airline started generating positive cash flow at the beginning of March, a key milestone for an industry that has been burning money after drastically scaling back flights last year as demand tanked.

Frontier is now benefiting from a recovery driven by domestic leisure travel, its specialty, flying more capacity this March than in the same month of 2019.

“Coming out of this, we’re in the best position we believe of anyone in the space given our concentration in the domestic leisure business and our ability to make money with low fares,” Biffle said in a virtual interview from New York.

The airline, owned by private equity firm Indigo Partners, whose managing partner is no-frills tycoon Bill Franke, is seeking to raise around $600 million from its initial public offering, its second attempt to go public.

Frontier on Wednesday priced its initial public offering of 30 million shares at $19 per share, the low end of its marketed range of $19-$21, likely underscoring the risks involved as the airline industry pulls out of its worst crisis.

Airline investments have been notoriously volatile in the past. The head of planemaker Boeing Co said on Wednesday the pace of vaccinations hold the key to the industry’s recovery to prior levels.

Environmental groups have called into question the industry’s plans for reducing emissions and say cheap fares such as those practiced by ultra-low-cost carriers over-stimulate the demand for air travel and contribute to global warming.

Frontier, now valued at about $4 billion, is offering 15 million shares, and will receive net proceeds of about $266 million, the carrier said.

It will use the proceeds, half going onto its balance sheet and half to Indigo and other selling shareholders, to fund growth and manage debt, including repaying some of the $150 million in government loans from a COVID-19 relief package.

That will help restore its balance sheet to near pre-pandemic levels and allow it to continue growing by 10% to 15% a year, Chief Financial Officer Jimmy Dempsey said.

The listing follows a stellar debut by Apollo Global Management-backed Sun Country Airlines last month.

Like other U.S. budget carriers, Frontier took on less debt and had a lower cash burn than large legacy airlines, creating a better financial position for a recovery that Biffle said is coming fast.

Frontier, with $1.25 billion of revenue in 2020, is targeting growth from all of its key U.S. cities beyond its home base Denver, where it has roughly 100 non-stop flights, including popular Florida destinations such as Orlando and Miami. It plans to open Tampa and Atlanta routes later this year.

The airline averted employee furloughs during the pandemic and was among the first to announce pilot and flight attendant hires. It expects to hire roughly 700 employees this year as it receives six new aircraft.

It hires roughly 100 employees per airplane, including mechanics and ground staff, the executives said.

Frontier has 156 aircraft on order with Airbus SE and the new jets will feature lighter-weight seats debuted last week to cut its fuel burn.

The airline generates 43% fuel savings compared with other U.S. airlines, making it the most fuel-efficient U.S. carrier, according to a Frontier statement last week.

“We live in Colorado,” Biffle said, adding: “ESG is real.”

(Reporting by Tracy Rucinski, Editing by Sherry Jacob-Phillips)

S&P 500 Subdued as Focus Turns to Fed

By Shashank Nayar and Medha Singh

Delta Air Lines, Southwest Airlines and JetBlue Airways said leisure bookings are rising and offered some of the first concrete signs that the worst may be over for the airline industry.

The S&P 1500 airlines index jumped about 3.8% to a one-year high, while planemaker Boeing Co added about 2%.

Other travel-related stocks including Carnival Corp, Wynn Resorts and MGM Resorts gained between 3% and 5%.

Wall Street’s main indexes on Friday logged their best week in six as approval of a $1.9 trillion relief package and mass vaccinations fueled demand for economy-linked stocks such as banks, energy, materials at the cost of high-growth tech names.

The major U.S. stock indexes were roiled in recent weeks as a spike in longer-dated U.S. bond yields due to fears of an increase in inflation and, in response, a tapering of the Fed’s easy monetary policy worried investors.

“The U.S. economy looks in a better shape than most other developed economies,” said Hussein Sayed, chief market strategist at FXTM.

“Despite the rosier economic outlook, this week’s Fed meeting is expected to be absent of major policy changes.”

At the end of Fed’s two-day meeting on Wednesday, policymakers are expected to forecast that the U.S. economy will grow in 2021 at the fastest rate in decades while reiterating their dovish stance for the foreseeable future.

The yields on benchmark 10-year Treasuries hovered near their 13-month high at 1.61%, slightly lower than its peak of 1.64% hit on Friday.

At 9:47 a.m. ET, the Dow Jones Industrial Average rose 87.51 points, or 0.27%, to 32,866.15, the S&P 500 gained 0.29 points, or 0.01%, to 3,943.63 and the Nasdaq Composite lost 6.81 points, or 0.05%, to 13,313.11.

Five of the major S&P sectors were lower, with financials and energy leading losses.

Tesla Inc added “Technoking of Tesla” to billionaire Chief Executive Elon Musk’s list of official titles in a formal regulatory filing that also named finance chief Zachary Kirkhorn “Master of Coin”. Tesla’s shares were nearly flat.

Eli Lilly and Co shares slumped about 8.5% after “mixed” results from the drugmaker’s mid-stage trial testing its experimental drug to treat Alzheimer’s cast a doubt on the chances for the drug’s accelerated approval, according to analysts.

Advancing issues outnumbered decliners by a 1.2-to-1 ratio on the NYSE and a 1-to-1 ratio on the Nasdaq.

The S&P 500 posted 59 new 52-week highs and no new low, while the Nasdaq recorded 239 new highs and six new lows.

(Reporting by Shashank Nayar and Medha Singh in Bengaluru; Editing by Maju Samuel)

United Airlines Shares Slump on Deep Quarterly Loss; Lost $7.1 Billion in 2020

United Airlines reported worse-than-expected earnings in the fourth quarter with net loss ballooning to $1.9 billion and to $7.1 billion for the full-year 2020 as the COVID-19 pandemic restrictions hammered air travel demand, sending its shares down about 3% in extended trading on Wednesday.

Chicago, Illinois-based airline reported fourth-quarter adjusted net loss of $2.1 billion, or a loss of $7 per share. That missed Wall Street’s estimates for a loss of $6.56 per share. The airlines’ reported loss of $7.7 billion for the full-year 2020 and total operating revenue declined 69% to $3.4 billion from the same quarter in 2019.

“Domestic remained the relative source of strength for the airline, as revenues fell 72% compared to international down 83%. The one source of relative strength on the international side was Latin America, which saw revenues decline by just 65% y-o-y as leisure demand to the region has remained strong. Cargo revenue was another source of strength, increasing 77% y-o-y, with other operating revenue declining by 31% y-o-y,” wrote Sheila Kahyaoglu, equity analyst at Jefferies.

The airline which operates a large domestic and international route network spanning cities large and small across the United States and all six continents said over the last three quarters, the company has identified $1.4 billion of annual cost savings and has a path to achieve at least $2.0 billion in structural reductions moving forward.

United Airlines forecasts the first quarter 2021 total operating revenue to be down 65-70% versus the first quarter of 2019. Accelerated distribution of the COVID-19 vaccine may lead to faster improvement, however, the company is not including this potential improvement in its first-quarter 2021 revenue outlook. The airline forecast first-quarter 2021 capacity to be down at least 51%.

United Airlines shares slumped about 3% to $43.97 in extended trading on Wednesday; the stock plunged 50% in 2020.

Analyst Comments

“United reported 4Q20 adjusted EPS slightly below our and Street expectations. Near term revenue trends are slightly worse than expected, but likely not a major focus for investors. Management targeted +$2 Bn in annual costs savings that should allow them to exceed2019 EBITDA margins by 2023. Many will look for comments on summer bookings as a snapback in 2H21 travel is expected,” said Helane Becker, equity analyst at Cowen and company.

“Trading activity will likely hinge on management comments about summer bookings and if they’ve seen any increased activity to support the idea of pent-up demand. The idea of a strong 2H21 will be dictated by vaccine distribution, something the Biden administration should push aggressively early in his administration.”

United Airlines Stock Price Forecast

Thirteen analysts who offered stock ratings for United Airlines in the last three months forecast the average price in 12 months at $48.91 with a high forecast of $62.00 and a low forecast of $32.00.

The average price target represents an 8.26% increase from the last price of $45.18. From those 13 analysts, four rated “Buy”, five rated “Hold” and four rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $37 with a high of $79 under a bull scenario and $21 under the worst-case scenario. The firm currently has an “Underweight” rating on the airline holding company’s stock.

“Why Underweight? We believe United Airlines (UAL) has the most challenged network of any airline in our coverage based on our path for a COVID-19 recovery and a levered balance sheet, which could limit rebound opportunities. In addition, UAL’s new CEO Scott Kirby (former COO) is very well regarded by investors but investors may wait to see evidence that UAL is indeed focused on cost improvement rather than aggressive growth (at the cost of PRASM) before giving the stock credit,” said Ravi Shanker, equity analyst at Morgan Stanley.

Several other analysts have also recently commented on the stock. Stifel raised the target price to $47 from $33. Cowen and company upped to outperform from market perform, raising the price objective to $53 from $34. BNP Paribas issued an “underperform” rating and a $32 target price for the company. Citigroup reduced their price target to $43 from $47 and set a “buy” rating.

In addition, Zacks Investment Research downgraded to a “sell” rating from a “hold” and set a $38 price target. Jefferies Financial Group issued a “hold” rating and a $45 price target. At last, Exane BNP Paribas issued an “underperform” rating and a $32 price target for the company.

Check out FX Empire’s earnings calendar

Earnings to Watch Next Week: Logitech, Goldman Sachs, NetFlix and IBM in Focus

Next week’s earnings are of much significance for major market movements as 2021 is believed to be a year of recovery on hopes of successful roll-out of the COVID-19 vaccine.

Earnings Calendar For The Week Of January 18

Monday (January 18)

IN THE SPOTLIGHT: LOGITECH INTERNATIONAL

Logitech International S.A., a Swiss-American manufacturer of computer peripherals and software, is expected to report a profit of $1.08 in the fiscal third quarter, which represents year-over-year growth of about 29% from the same quarter last year when the company reported 84 cents per share.

The Lausanne-based company’s revenue to grow over 35% year-over-year to $1.23 billion from $902.69 million in the same period last year.

“We are bullish into Logitech‘s F3Q21 earnings report next week as our December quarter checks point to a better than the expected market environment, most notably for PC peripherals. We’d be buyers into the print and raise our PT to $113 (from $106) to account for recent peer multiple expansion,” noted Erik Woodring, equity analyst at Morgan Stanley.

Tuesday (January 19)

IN THE SPOTLIGHT: GOLDMAN SACHS, NETFLIX

GOLDMAN SACHS: New York-based leading global investment bank is expected to report a profit of $7.33 in the fourth quarter, which represents year-over-year growth of about 56% from the same quarter last year when the company reported $4.69 per share. The bank’s revenue is expected to dip 4.9% from the year-ago quarter to $9.47 billion.

“As market volatility and the urgency around capital raising activity (both equity and debt) subside in 2021, we expect total revenues decline 11% y/y from a strong 2020. We are valuing the group on normalized 2023 EPS. While we still see 15%+ upside to Goldman Sachs (GS) based on this methodology, we see even more upside elsewhere in the group, particularly in consumer finance stocks which have been under more pressure,” said Betsy Graseck, equity analyst at Morgan Stanley.

“This drives our Underweight rating. Over time, we expect GS can drive some multiple expansion as management executes on its multi-year strategic shift towards higher recurring revenues.”

NETFLIX: California-based global internet entertainment service company is expected to report a profit of $1.35 in the fourth quarter, which represents year-over-year growth of about 4% from the same quarter last year when the company reported $1.30 per share. The streaming video pioneer’s revenue is expected to surge over 20% from the year-ago quarter to $6.60 billion.

“We expect paid net adds to come in the above guide, helped by ongoing shutdowns & seasonal strength. Our view is supported by our positive proprietary 4Q20 survey data, which implies rising pricing power into year-end. We tweaked estimate’s & introduced ’21 quarters; in turn, our DCF-based price target rises to $650 from $625 prior; reiterate ‘Outperform’ rating,” said John Blackledge, equity analyst at Cowen and company.

NetFlix (NFLX) shares were +67% in ’20 alongside a pandemic surge, following massive sub beats in 1Q / 2Q respectively and 28.1MM total paid net adds in 1Q-3Q ’20, up 47% y/y. With consumers staying home amid colder weather & limited social activities, we expect Netflix engagement to remain high; meanwhile, to the extent, there is any NT pressure on UCAN paid subs from the 4Q US price increase, we would consider this a buying opportunity for NFLX shares as the co. grows the value prop alongside rising ARPU.”

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

Ticker Company EPS Forecast
PACW Pacwest Bancorp $0.67
CMA Comerica $1.18
ONB Old National Bancorp $0.38
SCHW Charles Schwab $0.65
GS Goldman Sachs $7.33
STT State Street $1.57
HAL Halliburton $0.15
FULT Fulton Financial $0.27
JBHT J B Hunt Transport Services $1.30
ZION Zions Bancorporation $1.01
PNFP Pinnacle Financial Partners $1.36
FNB FNB $0.24
UCBI United Community Banks $0.60
NFLX Netflix $1.35
IBKR Interactive Brokers $0.58
RNST Renasant $0.59
SBNY Signature Bank $2.91

Wednesday (January 20)

IN THE SPOTLIGHT: UNITEDHEALTH

UNITEDHEALTH: Minnesota-based health insurance and health care data analysis giant is expected to report a profit of $2.41 in the fourth quarter, which represents a year-over-year decline of about 40% from the same quarter last year when the company reported $3.90 per share.

The largest insurance company by Net Premiums is witnessing a slowdown in its international business as increased joblessness due to the COVID-19 pandemic has dented demand for commercial membership.

UnitedHealth Group is the number one Medicare Advantage player with 28% market share, the number two Medicare PDP player with 20% market share, and the number two commercial player with 15% market share. United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country,” wrote Ricky Goldwasser, equity analyst at Morgan Stanley.

“With a large lead in the breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well-positioned for any potential changes in the US healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A.”

United Airlines is expected to report a deep loss in the fourth quarter due to the COIVD-19 pandemic, which harmed demand for travel.

Ohio-based Tide detergent and Pampers diaper manufacturer Procter & Gamble is expected to report an increase in profits on rising demand for home care and laundry products amid the COIVD-19 pandemic.

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

Ticker Company EPS Forecast
UNH UnitedHealth $2.41
PG Procter & Gamble $1.51
ASML Asml $2.96
MS Morgan Stanley $1.30
USB US Bancorp $0.95
BK Bank Of New York Mellon $0.88
FAST Fastenal $0.33
CFG Citizens Financial $0.91
CBSH Commerce Bancshares $0.92
BOKF BOK Financial $1.92
FCEL Fuelcell Energy -$0.07
KMI Kinder Morgan $0.24
DFS Discover Financial Services $2.36
UAL United Airlines Holdings -$6.56
AA Alcoa $0.09
WTFC Wintrust Financial $1.41
UMPQ Umpqua $0.48
HWC Hancock Whitney Corp $0.90
PLXS Plexus $1.10
STL Sterling Bancorp $0.46
PTC PTC $0.65

Thursday (January 21)

IN THE SPOTLIGHT: IBM

IBM: Armonk, New York-based technology and consulting company is expected to report a profit of $1.81 in the fourth quarter, which represents a year-over-year decline of over 60% from the same quarter last year when the company reported $4.71 per share.

“For 2020, IBM refrained from providing any guidance, citing business uncertainty. Nevertheless, management stated that the fourth quarter is a seasonally strong quarter. The company is witnessing robust pipelines across hybrid cloud and data platform, AI solutions, in Cognitive Apps business driven by strength in Cloud Paks and Security, cloud-based transformation services in GBS segment, and App modernization offerings,” noted analysts at ZACKS Research.

“Also, management is banking on advancement in Red Hat “actual backlog growth.” Moreover, gains from the rapid uptake of IBM z15 is anticipated to be a tailwind. The company also anticipates to end 2020 with reduced debt levels.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 21

Ticker Company EPS Forecast
UNP Union Pacific $2.24
TFC Truist Financial Corp $0.85
TAL TAL International $0.04
TRV Travelers Companies $3.16
BKR Baker Hughes Co $0.17
FITB Fifth Third Bancorp $0.68
NTRS Northern $1.49
MTB M&T Bank $3.02
KEY KEY $0.43
CTXS Citrix Systems $1.34
HOMB Home Bancshares $0.39
INDB Independent Bank $1.02
FBC Flagstar Bancorp $2.36
WBS Webster Financial $0.75
BKU BankUnited $0.71
WNS Wns Holdings $0.59
INTC Intel $1.10
IBM IBM $1.81
ISRG Intuitive Surgical $3.09
CSX CSX $1.01
PPG PPG Industries $1.58
SIVB SVB Financial $3.79
TCBI Texas Capital Bancshares $1.13
ASB Associated Banc $0.30
PBCT People’s United Financial $0.32
OZK Bank Ozk $0.78
WAL Western Alliance Bancorporation $1.33
BKRKY Bank Rakyat $0.17
MTCH Match Group $0.50
MTG MGIC Investment $0.37
STX Seagate Technology $1.13

Friday (January 22)

Ticker Company EPS Forecast
EDU New Oriental Education Tech $0.26
ABBV AbbVie $2.86
HON Honeywell International $2.00
SLB Schlumberger $0.17
KSU Kansas City Southern $1.93
RF Regions Financial $0.42
HBAN Huntington Bancshares $0.29
ALLY Ally Financial $1.05
FHN First Horizon National $0.28
HRC Hill-Rom $1.05
NEP Nextera Energy Partners $0.39
IBN Icici $0.14
TOP Topdanmark A/S kr3.63

 

3 Airline Stocks Ready for Takeoff

Coronavirus-induced stay-at-home orders and border closures have wreaked havoc on the airline industry in 2020. Furthermore, a move to remote working during the pandemic threatens to significantly reduce corporate travel moving forward. Philanthropist and Microsoft co-founder Bill Gates recently said he expects business travel to disappear by over 50% longer-term. “My prediction would be that over 50% of business travel and over 30% of days in the office will go away,” Gates told the New York Times’ Dealbook conference, per CNBC.

However, over the past month, airline stocks have flown back into favor with investors after successful COVID-19 vaccine breakthroughs give hope that pre-pandemic travel levels may return as more people take to the skies. Below, we take a look at the three largest airline stocks by market capitalization.

Southwest Airlines Co. (LUV)

The Dallas-based low-cost carrier operates over 700 aircraft in an all-Boeing 737 fleet, primarily targeting leisure and independent small business customers. Although the Federal Aviation Administration (FAA) lifted its 20-month ban of the troubled Boeing 737 Max from flying passengers Wednesday, Southwest said the jet wouldn’t re-enter service until later next year. From a technical standpoint, the share price broke out above a nine-month downtrend line that may see it retest its pre-pandemic high at $58.83. The airline has a market cap of $27.35 billion.

Delta Air Lines, Inc. (DAL)

With a market cap of $25.67 billion, Delta flies to over 300 destinations in more than 50 countries. The company announced in September that it plans to borrow $6.5 billion, backed by its frequent-flyer loyalty program to secure liquidity to ride out the tail end of the pandemic.

More recently, the full-service airline canceled one in every five flights it was scheduled to operate on Thanksgiving Day amid crew shortages brought about by the health crisis. Turning to the charts, a recent cross of the 50-day SMA back above the 200-day SMA and breakout above a multi-month downtrend line may lead to further gains toward crucial overhead resistance at $51.

United Airlines Holdings, Inc. (UAL)

United Airlines operates as a full-service carrier through its strategically located hubs in San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C. Last month, Raymond James’ airline analyst Savanthi Syth upgraded the airline’s stock to ‘Outperform’ from ‘Market Perform’ and reiterated the firm’s $60 price target.

Syth argues the company sits in a better position than its competitors for a travel revival after securing a pilot agreement through 2022. He also noted that United has no pending fleet retirements, allowing it to rapidly increase capacity when demand picks up. Moving on to the chart, a comprehensive breakout above a crucial downtrend line and the 200-day SMA could see the shares take flight to the January swing low at $74.34. The airline has a market value of $13.18 billion.

For a look at today’s earnings schedule, check out our earnings calendar.

United Airlines Warns Of Rising Cancellations

United Airlines Holdings Inc. (UAL) reduced guidance on Thursday, noting a deceleration in bookings and increase in cancellations as a result of the surging COVID-19 pandemic. Major airline carriers had booked stronger-than expected traffic over the summer months, as the virus faded from the front pages in most parts of the world. Several CEOs upwardly revised dismal forecasts during that period, allowing complacency to overcome common sense.

Business Travel Will ‘Go Away’

Former Microsoft Corp. (MSFT) Bill Gates put a damper on Boeing Co. (BA) and the airline sector on Wednesday, declaring that 50% of business travel will ‘go away permanently’ because of technology like the virtual meeting software offered by Zoom Video Communications Inc. (ZM). He also predicted 30% of people will be working from home in the long-term, allowing corporations to become leaner and meaner, with fewer-owned properties and multiyear leases.

United Airlines now expects fourth quarter capacity to drop ‘at least’ 55% compared to same quarter in 2019. It also guided for a 67% reduction in revenue, below prior forecasts. The company will also burn cash at a faster rate, eating up approximately $15 million to $20 million, plus $10 million of average debt principal and severance payments per day. None of these forecasts bode well for Delta Air Lines Inc. (DAL) or American Airlines Group Inc. (AAL).

Wall Street And Technical Outlook

Wall Street consensus has deteriorated in recent months, now standing at a neutral ‘Hold’ rating based upon 5 ‘Buy’, 7 ‘Hold’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $32 to a Street-high $54 while the stock is set to open Thursday’s U.S. session right at the median $41 target. Capacity news and vaccine updates should drive price action into 2021 with this mid-range placement, suggesting limited upside.

The stock posted an all-time high at 97.85 in 2018 and entered a narrow consolidation that broke to the downside in February 2020, also breaking multiple support levels going back to 2013. The 2016 low in the upper 30s is now getting tested while continued upside will run into a buzz saw of resistance in the 50s, where the 2017 low and 200-week moving averages are narrow-aligned. On the downside, bears will gain control of the tape if a selloff pieces rising 2020 lows near 30.

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