United Airlines Reports Worse-Than-Expected 1Q Results

United Airlines reported disappointing results as losses widened in the first quarter. The airline company reported a non-GAAP adjusted diluted loss per share of $7.50, which was worse than analysts’ estimates of a $7.05 loss. Revenue for the quarter dropped 59.6% year-on-year to $3.22 billion, falling short of the consensus estimate of $3.27 billion.

United Airlines (UAL) CEO, Scott Kirby said, “The United team has now spent a year facing down the most disruptive crisis our industry has ever faced and because of their skill and dedication to our customers, we’re poised to emerge from this pandemic with a future that is brighter than ever.”

“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,” Kirby added.

In the fiscal second quarter, UAL expects Total Revenue Per Available Seat Mile (TRASM) to decline 20%  versus 2Q FY19 and also expects capacity to be down 45%. UAL anticipates a 32% fall in operating expenses, excluding special operating charges, from the fiscal second quarter of FY19, and an adjusted loss before interest, taxes, depreciation, and amortization margin of 20% in 2Q FY21. (See United Airlines stock analysis on TipRanks)

Following the 1Q results, Morgan Stanley analyst Ravi Shanker reiterated a Hold and a price target of $65 on the stock. Shanker said in a note to investors, “Milestones for the rest of the year look encouraging. Mgmt. said that April load factors were slightly behind 2019 with May expected to be ahead with 80%+ for June and beyond – as we noted in our Sep 2020 sector initiation, we expect load factors to be the first revenue metric to normalize this cycle…”

“Re traffic, mgmt. noted that wherever travel was permitted without restrictions, volumes were already above 2019 levels,” Shanker added.

Overall, the Street is cautiously optimistic on the stock with a Moderate Buy consensus rating based on 7 Buys, 6 Holds, and 1 Sell. The average analyst price target of $64.92 implies 26.8% upside potential from current levels.

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