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Category: Stock Market and United Airlines (UAL)
Date: 21 January 2021 Stock Price of United Airlines (UAL): $45.18 We take a look at the 4th 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 reported revenues of $3.4 billion and a net loss of -$1.89 billion.
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- Aggressively managing the challenges of 2020 depended on our innovation and fast-paced decision making. But, the truth is that COVID-19 has changed United Airlines forever - United Airlines 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' 4th 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 4th quarter 2020 earnings report
CHICAGO, Jan. 20, 2021 /PRNewswire/ -- United Airlines (UAL) today announced fourth-quarter and full-year 2020 financial results. The company continues its efforts to lead the industry as it manages the most disruptive crisis in aviation history.
Since the beginning of the COVID-19 crisis, United has raised over $26 billion in liquidity and made important progress in reducing core cash burn (see detailed chart below) to ensure the company's survival. 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 ended 2020 with $19.7 billion in available liquidity1, including an undrawn revolver capacity and funds available under the CARES Act loan program from the U.S. Treasury.
Having stabilized its financial foundation, the company expects 2021 to be a transition year that's focused on preparing for a recovery. United has resumed heavy maintenance and engine overhauls, investments that are essential to recovery when demand returns. The combination of structural cost reduction and timely investments will help set up United to exceed its 2019 adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) margin in 2023. The company expressed high confidence that it would achieve this target by 2023 – and said its ongoing recovery planning would help ensure the company was equipped to reach this level even sooner, if demand returns more quickly.
"Aggressively managing the challenges of 2020 depended on our innovation and fast-paced decision making. But, the truth is that COVID-19 has changed United Airlines forever," said United Airlines CEO Scott Kirby. "The passion, teamwork and perseverance that the United team showed in 2020 is exactly what will help us build a new United Airlines that's better, stronger and more profitable than ever. I could not be prouder of – and more grateful to – this team, which is going to lead us there."
Since the beginning of the COVID-19 crisis, United has raised over $26 billion in liquidity and made important progress in reducing core cash burn (see detailed chart below) to ensure the company's survival. 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 ended 2020 with $19.7 billion in available liquidity1, including an undrawn revolver capacity and funds available under the CARES Act loan program from the U.S. Treasury.
Having stabilized its financial foundation, the company expects 2021 to be a transition year that's focused on preparing for a recovery. United has resumed heavy maintenance and engine overhauls, investments that are essential to recovery when demand returns. The combination of structural cost reduction and timely investments will help set up United to exceed its 2019 adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) margin in 2023. The company expressed high confidence that it would achieve this target by 2023 – and said its ongoing recovery planning would help ensure the company was equipped to reach this level even sooner, if demand returns more quickly.
"Aggressively managing the challenges of 2020 depended on our innovation and fast-paced decision making. But, the truth is that COVID-19 has changed United Airlines forever," said United Airlines CEO Scott Kirby. "The passion, teamwork and perseverance that the United team showed in 2020 is exactly what will help us build a new United Airlines that's better, stronger and more profitable than ever. I could not be prouder of – and more grateful to – this team, which is going to lead us there."
Fourth-Quarter and Full-Year 2020 Financial Results
Core Cash Burn
First Quarter 2021 Outlook
- Reported fourth-quarter net loss of $1.9 billion, $7.1 billion for the full-year 2020.
- Reported fourth-quarter adjusted net loss2 of $2.1 billion, $7.7 billion for the full-year 2020.
- Reported fourth-quarter total operating revenue of $3.4 billion, down 69% versus fourth-quarter 2019.
- Reported fourth-quarter operating expenses down 45% versus fourth-quarter 2019, down 42% excluding special charges3.
Core Cash Burn
- Reported fourth-quarter daily cash burn4 of $23 million, plus $10 million of average debt principal payments and severance payments per day.
- Reported fourth-quarter core cash burn4 of $19 million per day, an improvement of an average of $5 million per day versus the third-quarter 2020.
First Quarter 2021 Outlook
- Based on current trends, the company expects first quarter 2021 total operating revenue to be down 65 percent to 70 percent versus the first quarter 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.
- Expects first quarter 2021 capacity to be down at least 51 percent versus the first quarter of 2019.
- Expects first quarter 2021 ending available liquidity to be similar to year-end 2020 available liquidity of around $19.7 billion1.
United Airlines (NASDAQ: UAL) stock price chart over the last 5 years
The image below shows the stock price history of United Airlines (UAL) over the last 5 years. And its not been a good time for United Airlines stockholders with the stock decreasing by-7.6% over the last 5 years. But considering the losses suffered due to the Covid-19 a mere -7.6% decline in their stock price over the last 5 years doesnt look to bad.
The stock of United Airlines is trading at closer to its 52 week low than it is to its 52 week high which is a clear indication that the short term sentiment and momentum of United Airlines stock is still negative at this point in time.
The stock of United Airlines is trading at closer to its 52 week low than it is to its 52 week high which is a clear indication that the short term sentiment and momentum of United Airlines stock is still negative at this point in time.
United Airlines (UAL) vs Delta Airlines (DAL) vs Southwest Airlines (LUV) stock over time
The image below shows the stock price performance of United Airlines (UAL), Southwest Airlines (LUV) and Delta Airlines (DAL) over the last 5 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 5 years:
So the stock of Southwest Airlines have easily outperformed that of Delta and United Airlines over the last 5 years.
- Southwest Airlines (LUV): 30%
- Delta Airlines (DAL): -6.7%
- United Airlines (UAL): -7.6%
So the stock of Southwest Airlines have easily outperformed that of Delta and United Airlines over the last 5 years.
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 $56.50 a United Airlines stock. We therefore believe that the stock is undervalued at its current price of $45.18
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 $56.50. Therefore we see a good entry point into United Airlines stock at $50.90 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 $56.50. Therefore we see a good entry point into United Airlines stock at $50.90 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 (UAL)
It is expected that United Airlines will release their 1st quarter 2021 earnings release towards end April 2021