CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows:
Our 12-month target of $41, down $19, is 4.5x our ’24 EPS estimate (cut to $9.13 from $11.38; ’23 to $9.87 from $11.30), below its peer forward average of 4.9x, which we believe is merited due to its above-peer average floating-rate debt ($11B vs. peer average of ~$3B) and lofty capex needs (~$9B vs. peer average of $4B in ’24). Q2 EPS of $3.65 vs. $2.81 beat consensus by $0.24. Q2 revenues grew ~13 Y/Y. The stock fell ~10% today, which we think is due to rising unit costs (labor and fuel) and the impact of the recent Israeli conflict (2% of total capacity per UAL). In Q3, UAL finalized a labor contract with its pilots (valued at $10B, lifting pay by as much as 40% over the next four years); however, a deal has not been reached with flight attendants, leaving room for unit costs to rise further. In addition, UAL’s Q4 fuel cost outlook ($3.28/g) is expected to grow 11% sequentially (vs. $2.95), and with the EIA forecasting WTI to average $91/b in 2024, UAL could see its margins remaining flat in ’24 vs. ’23.