United Airlines Shares Drop Following Strong Quarterly Loss; Analysts optimistic about the 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 rising fuel costs, causing its shares to fall more than 2% in negotiations extended Monday.

The Chicago, Illinois-based airline reported a net loss of $ 1.4 billion in the first quarter of 2021, an adjusted net loss of $ 2.4 billion, without Wall Street’s consensus estimates for the loss of $ 2.23 billion. The company’s total operating revenue plunged 66% year-over-year to $ 3.2 billion. United lost $ 7.50 per share in the first quarter, worse than analysts’ expectations for a loss of $ 6.98 per share.

United Airlines forecasts a decrease in total revenue per available seat mile (TRASM) of approximately 20% in the second quarter of 2021 compared to the second quarter of 2019. The capacity of the second quarter of 2021 will be down approximately 45% by compared to the second quarter of 2019 and operating expenses excluding special charges4 down almost 32%.

The price of fuel per gallon is estimated to be around $ 1.83 in the second quarter.

“We have focused on the next step on the horizon and now see a clear path to profitability. We are encouraged by the strong evidence of pent-up air travel demand and our continued ability to meet it, which is why we are as confident as ever that we will meet our target of exceeding 2019 Adjusted EBITDA margins in 2023., if not sooner, ”said Scott Kirby, CEO of United Airlines.

Shares of United Airlines fell more than 2% to $ 53.80 in extended trading on Monday. The stock plunged more than 50% last year.

Analyst comments

“Higher than expected payroll and maintenance costs resulted in lower than expected EPS in the first quarter of 21. Performance and load factor slightly exceeded our expectations as the company is cautious about capacity. Management estimates that United can achieve EBITDA and net profit b / e with long-haul commercial / international demand down 70% y / y2 and 35% y / y2, respectively, ”noted Helane Becker, Analyst shares at Cowen and Company.

United shares are flat or down in the after-hours trading session with mixed results as slightly higher than expected revenue, relative to our estimate, was more than offset by payroll costs and higher maintenance. The company is deploying additional capacity in markets where it sees pent-up demand and expects positive EBITDA margins later this year. Management commentary calls for positive EBITDA and net income, with international business / long-haul demand down 70% and 35% respectively from 2019 levels. Although comments were likely made for showing where the equilibrium may occur during the recovery, investors may interpret them as an expectation that it will take longer than expected for business and international travel to fully recover. “

United Airlines Share Price Forecast

Fourteen analysts who have offered stock quotes for United Airlines in the past three months are forecasting the 12-month average price 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” and one rated “Sell,” according to Tipranks.

Morgan Stanley gave the base target price of $ 65 with a high of $ 96 in a bullish scenario and $ 30 in a worst-case scenario. The firm gave a rating “on an equal weight” basis to the actions of the airline.

“Why Equal-Weight? We appreciate UAL’s confidence in providing a 2023 cost guide that includes a goal of permanently reducing $ 2 billion in costs and at least matching 2019 margins. The market is also very keen to see the strategy for UAL marketed on the revenue side as travelers return. However, the legacy network footprint is a slightly larger overhang than its network peers and the capitalization structure will likely take years to normalize, which could remain an overhang on the stock, ”noted Ravi Shanker, equity analyst. at Morgan Stanley.

Several other analysts have also updated their stock market outlook. Cowen and Company raised the expected share price from $ 53 to $ 65. Raymond James increased the target price from $ 60 to $ 80. JP Morgan raised the price target to $ 58 from $ 43. Citigroup raised the price target from $ 54 to $ 67. Jefferies raised the target price from $ 55 to $ 60.

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