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Category: Stock Market and United Airlines (UAL)
Date: 24 July 2020 Stock Price of United Airlines: $33.23 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of United Airlines, a global airline company that has over 4900 flights departing flights on a daily basis to 358 different airports across 5 continents. The group's revenue declined by -87.1% for the quarter compared to the same quarter of the previous year and they reported a loss of -$1.627 billion
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- I am grateful for the professionalism and dedication of our United team members who persevered through an historic and challenging period to deliver for our customers- CEO Scott Kirby."
About United Airlines
United's shared purpose is "Connecting People. Uniting the World." We are more focused than ever on our commitment to customers through a series of innovations and improvements designed to help build a great experience: Every customer. Every flight. Every day. Together, United Airlines and United Express operate approximately 4,900 flights a day to 358 airports across five continents. In 2018, United and United Express operated more than 1.7 million flights carrying more than 158 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C. United operates 788 mainline aircraft and the airline's United Express carriers operate 560 regional aircraft. United is a founding member of Star Alliance, which provides service to 195 countries via 26 member airlines. For more information, visit united.com, follow @United on Twitter and Instagram or connect on Facebook. The common stock of United's parent, United Airlines Holdings, Inc., is traded on the Nasdaq under the symbol "UAL"
Overview of United Airlines' 2nd quarter 2020 earnings report
Data below is reported for the latest quarter unless stated otherwise
- Revenue: $7.979 billion (up from $9.589 billion for the same quarter of the previous year)
- Revenue decreased by -16.8% over the last 12 months
- Operating expenses: $8.951 billion (up from $9.094 billion for the same quarter of the previous year)
- Operating expenses decreased by -1.6% over the last 12 months
- Net loss: -$2.11 billion (down from $292 million for the same quarter of the previous year)
- Diluted loss per share: -$6.86 (down from $1.09 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 248.5 million (down from 268.3 million for the same quarter of the previous year)
- Cash and cash equivalents: $3.44 billion
- Cash and cash equivalents per share: $13.84
- Cash and cash equivalents makes up 33.8% of United Airlines' market capital
- Cash and cash equivalents makes up 6.5% of United Airlines' total assets
- Accounts receivable: $792 million
- Accounts receivable makes up 1.5% of United Airlines' total assets
- Goodwill: $4.523 billion
- Goodwill per share: $18.20
- Goodwill makes up 44.5% of United Airlines' total assets
- Stockholders equity of United Airlines' : $9.418 billion
- Stockholders equity per share: $37.90
- So United Airlines is trading at 1.07 times its stockholders equity per share. This is just outside the expected range of between 2 and 4 most firms tend to trade at
- Long term debt of United Airlines: $13.2 billion
- Long term debt makes up 47.8% of United Airlines total liabilities
United Airlines's management commentary on their 2nd quarter 2020 earnings report
CHICAGO, July 21, 2020 /PRNewswire/ -- United Airlines (UAL) today announced second quarter 2020 financial results, the most difficult financial quarter in its 94-year history, with a net loss of $1.6 billion, and an adjusted net loss¹ of $2.6 billion. Total operating revenues were down 87.1% year-over-year, on an 87.8 percent decrease in capacity year-over-year. The company's total liquidity as of the close of business on Monday, July 20, 2020 was approximately $15.2 billion. United now expects liquidity at the end of the third quarter to be over $18 billion.
Cash burn during the second quarter averaged $40 million a day, including $3 million of principal payments and severance expenses. The company currently is forecasting average daily cash burn to be approximately $25 million during the third quarter of 2020 including $6 million of principal repayments and severance expenses.
United believes it did the best job of matching actual capacity to demand among its largest network peers. The company also expects to finish the quarter with the lowest average daily cash burn among large network carriers.
"I am grateful for the professionalism and dedication of our United team members who persevered through an historic and challenging period to deliver for our customers," said CEO Scott Kirby. "While this unprecedented crisis has been difficult for our team, we expect United produced fewer losses and lower cash burn in the second quarter than any of our large network competitors. We accomplished this by quickly and accurately forecasting the impact that COVID would have on passenger and cargo demand, accurately matching our schedule to that reduced demand, completing the largest debt financing deal in aviation history, and cutting expenses across our business. We believe this quick and aggressive action has positioned United to both survive the COVID crisis and capitalize on consumer demand when it sustainably returns."
Cash burn during the second quarter averaged $40 million a day, including $3 million of principal payments and severance expenses. The company currently is forecasting average daily cash burn to be approximately $25 million during the third quarter of 2020 including $6 million of principal repayments and severance expenses.
United believes it did the best job of matching actual capacity to demand among its largest network peers. The company also expects to finish the quarter with the lowest average daily cash burn among large network carriers.
"I am grateful for the professionalism and dedication of our United team members who persevered through an historic and challenging period to deliver for our customers," said CEO Scott Kirby. "While this unprecedented crisis has been difficult for our team, we expect United produced fewer losses and lower cash burn in the second quarter than any of our large network competitors. We accomplished this by quickly and accurately forecasting the impact that COVID would have on passenger and cargo demand, accurately matching our schedule to that reduced demand, completing the largest debt financing deal in aviation history, and cutting expenses across our business. We believe this quick and aggressive action has positioned United to both survive the COVID crisis and capitalize on consumer demand when it sustainably returns."
The company continued to take aggressive action to mitigate the impact of the COVID-19 pandemic by raising liquidity and reducing cash burn. The company is focused on remaining flexible to position the airline to bounce back when demand recovers.
- Since the start of the crisis the company has raised a total of $16.1 billion through debt offerings, stock issuances and the CARES Act Payroll Support Program grant and loan, among other items.
- As of July 2, raised $6.8 billion in financings secured against MileagePlus Holdings in the form of a $3.8 billion bond and a $3.0 billion term loan, with interest rates of 6.5% and LIBOR plus 5.25%, respectively.
- Entered into an equity distribution agreement for the issuance and sale from time to time of up to 28 million shares of UAL common stock in "at-the-market" offerings. Utilized the at-the-market program to raise $22 million through the sale of approximately 532,000 shares in the second quarter.
- The company entered into an agreement with a subsidiary of BOC Aviation Limited to finance through a sale leaseback transaction six Boeing 787-9 and 16 Boeing 737 MAX 9 aircraft that are currently subject to purchase agreements between United and The Boeing Company and are scheduled to deliver in 2020.
- Raised $250 million in a secured term loan facility.
- Increased cargo revenue by 36.3% by serving strategic international cargo-only missions and optimizing aircraft capacity with low passenger demand.
- Reduced total operating costs by 69% versus the second quarter of 2019; excluding special charges3, reduced operating costs by 54%.
- Full-year 2020 adjusted capital expenditures4 are now expected to be approximately $3.7 billion.
- In third quarter 2020 the company expects consolidated system capacity to be down 65% versus third quarter 2019. The company will continue to proactively evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand, and expects demand to remain suppressed until the availability of a widely accepted treatment and/or vaccine for COVID-19.
- Offered employees comprehensive voluntary separation packages including flight benefits and continuous pay through Nov. 30, 2020 with more than 6,000 employees opting to participate.
- Booked over 2,900 in-kind flights for medical professionals to support COVID-19 response in New Jersey/New York and California.
- More than 19.2 million miles donated by MileagePlus members and 7.6 million miles matched from United to help organizations providing relief during COVID-19.
- Donated more than 500,000 pounds of food from United Polaris lounges, United Clubs and catering kitchens to local food banks and charities.
- Over 7,500 face masks were made from upcycled unused ramp uniforms.
- More than 800 gallons of hand sanitizer produced by United employees in San Francisco for use by United employees.
- Donated 15,000 pillows, 2,800 amenity kits and 5,000 self-care products to charities and homeless shelters.
- More than 2.2 million pounds of food and household goods were processed by United employees at the Houston Food Bank.
- Flew over 78.6 million pounds of medical equipment and personal protective equipment and 2 million pounds of supplies to support military troops.
- Operated over 3,800 cargo-only flights to bring 204,000,000 pounds of cargo to communities in need.
- More than 2,300 United employees worldwide have volunteered, with over 30,800 hours served.
United Airlines (NASDAQ: UAL) stock price history
The image below, obtained from Google, shows the stock price history of United Airlines (NASDAQ: UAL) over the last 5 years. And it's not been a good time for United Airlines' stockholders. 5 years ago it was trading at around $56.50 and its currently trading at around $33.23 a stock. That's a loss of -41.2% suffered by United Airlines stockholders over the last 5 years.
The stock of United Airlines is trading at closer to its 52 week low of $17.80 than it is to its 52 week high high of $95.46, which to us is a clear indication that the short term sentiment and momentum of the stock of United Airlines is negative.
The stock of United Airlines is trading at closer to its 52 week low of $17.80 than it is to its 52 week high high of $95.46, which to us is a clear indication that the short term sentiment and momentum of the stock of United Airlines is negative.
United Airlines (UAL) vs Delta Airlines (DAL) vs American Airlines (AAL)
The image below shows the stock price performance of United Airlines (UAL), American Airlines (AAL) and Delta Airlines (DAL) over the last 3 years. The image shows the carnage in airline companies stock prices, especially since the start of 2020. Below the stock price return of the three aforementioned airlines over the last 3 years:
So American Airlines (AAL) has significantly underperformed against Delta (DAL) and United Airlines (UAL) over the last 3 years.
- Delta Airlines (DAL): -46.77%
- United Airlines (UAL): -50.98%
- American Airlines (AAL): -76.46%
So American Airlines (AAL) has significantly underperformed against Delta (DAL) and United Airlines (UAL) over the last 3 years.
Below the daily cash burn rate of various airlines:
For more on various airlines see our Airlines Fly Off article in which we compare the stock price performance and earnings report of various airlines.
- Southwest Airlines (LUV): $13 million
- United Airlines: $25 million
- Delta Airlines (DAL): $27 million
- American Airlines (AAL): $30 million
For more on various airlines see our Airlines Fly Off article in which we compare the stock price performance and earnings report of various airlines.
Recent coverage of United Airlines
The extract below discusses the latest results from United Airlines as obtained from Finance.Yahoo.com
United Airlines Holdings, Inc.'s (NASDAQ:UAL) price-to-earnings (or "P/E") ratio of 8.3x might make it look like a strong buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 17x and even P/E's above 34x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.
United Airlines Holdings hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Where Does United Airlines Holdings' P/E Sit Within Its Industry?It's plausible that United Airlines Holdings' particularly low P/E ratio could be a result of tendencies within its own industry. The image below shows that the Airlines industry as a whole also has a P/E ratio significantly lower than the market. So it appears the company's ratio could be influenced considerably by these industry numbers currently. Ordinarily, the majority of companies' P/E's would be compressed firmly by the general conditions within the Airlines industry. Still, the strength of the company's earnings will most likely determine where its P/E shall sit.
Read the full article here
United Airlines Holdings, Inc.'s (NASDAQ:UAL) price-to-earnings (or "P/E") ratio of 8.3x might make it look like a strong buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 17x and even P/E's above 34x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.
United Airlines Holdings hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Where Does United Airlines Holdings' P/E Sit Within Its Industry?It's plausible that United Airlines Holdings' particularly low P/E ratio could be a result of tendencies within its own industry. The image below shows that the Airlines industry as a whole also has a P/E ratio significantly lower than the market. So it appears the company's ratio could be influenced considerably by these industry numbers currently. Ordinarily, the majority of companies' P/E's would be compressed firmly by the general conditions within the Airlines industry. Still, the strength of the company's earnings will most likely determine where its P/E shall sit.
Read the full article here
United Airlines (NASDAQ: UAL) latest stock valuation
So what is United Airlines' stock worth based on the release of their latest earnings report and the fiscal guidance provided by United Airlines? Based on the latest earnings results, and their fiscal guidance our valuation models provide a target price (full value) price for United Airlines at $63.20 a United Airlines stock. We therefore believe that the stock is undervalued at its current price of $33.23
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target price (full value price) which in this case is $63.20 Therefore we see a good entry point into United Airlines stock at $56.90 or below. Since United Airlines is trading at well below our suggested entry point into the stock we rate United Airlines as a buy, but this recommendation is only for the brave as the airline industry is still in for a very tough time in the next 18 to 24 months.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target price (full value price) which in this case is $63.20 Therefore we see a good entry point into United Airlines stock at $56.90 or below. Since United Airlines is trading at well below our suggested entry point into the stock we rate United Airlines as a buy, but this recommendation is only for the brave as the airline industry is still in for a very tough time in the next 18 to 24 months.
Next earnings release of United Airlines
It is expected that United Airlines will release their 3rd quarter 2020 earnings release towards end October 2020