United Airlines posted strong Q3 results last week. The company’s revenue increased to $ 7.8 billion from $ 2.5 billion a year earlier, which turned out to be the best market forecast of $ 7.64 billion. However, revenue was lower than in the third quarter of 2019, which was $ 11.4 billion. July-September was $ 473 million, or $ 1.44 per share, compared with a loss of $ 1.8 billion, or $ 6.33 per share, in the same period last year. On a one-off basis, the company posted an adjusted loss of $ 1.02 per share, while market consensus assumed the company would post a net loss of $ 1.58 per share.
TIKR:
UAL
PRICE:
$47
TARGET PRICE:
$78
UPSIDE
66%
The company’s management attributed the good results to the recovery in activity in the premium segment, the continuing recovery in the business travel segment, as well as the easing of restrictions on a number of international flights. United Airlines carried 32.145 million passengers last quarter, compared to 9.793 million in the same period in 2020. The workload of flights increased to 76.1% compared to 47.8%, including on domestic routes – to 82.4% from 54.4%. Nevertheless, the company’s management provided a rather conservative outlook for the 4th quarter, as revenues are expected to decline by 25-30% compared to the fourth quarter of 2019. We positively assess the impact of quarterly financials on the company’s capitalization estimate, therefore we increase the target valuation of United Airlines shares from $ 72 to $ 76.
In early August, United Airlines passed an order to vaccinate all employees, so the company does not have to test its employees weekly. Positive tests for covid could result in flight cancellations, disrupting operational activities. The company’s management noted that the number of bookings for the holiday season by the end of 2021 exceeds the level of 2019. We positively assess the actions of the management and believe that United has every chance of becoming an industry leader. We believe that the work done to monetize the loyalty program provides the company with additional value, which at the moment is not taken into account by market participants. The factor of fleet renewal is the most important catalyst for capitalization growth in the future, since it will help the company increase business efficiency and optimize costs.
United Airlines Holdings (formerly United Continental Holdings) operates through its primary United Air Lines subsidiary. United Airlines is a leading passenger and cargo airline operating more than 4,900 flights a day to more than 360 airports. It serves destinations across five continents from US hubs in Newark, Chicago, Denver, Houston, Los Angeles, San Francisco, Washington, DC, and the US island of Guam. In addition, United is a member of the Star Alliance, a marketing and code-sharing group (the largest in the world) that includes several international airlines. In 2019, the company changed its name to United Airlines Holdings, Inc.