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United Airlines Stock Fell after Its Preliminary Q1 Results


Apr. 21 2020, Published 11:54 a.m. ET

United Airlines (NYSE:UAL) stock fell 8% in early trading on Monday after the company reported preliminary first-quarter losses. The stock was trading lower after the company announced that it will sell 22 planes to survive the cash crunch. Airline stocks have been trading lower since the coronavirus pandemic hit. As expected, the company posted a preliminary loss of $2.1 billion. United closed with a loss of 4.4% on Monday. Other airline stocks like Spirit Airlines (NASDAQ:SAVE), American Airlines (NASDAQ:AAL), and Delta Air Lines (NYSE:DAL) fell 3.0%, 4.4%, and 2.6%, respectively.

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United Airlines posted a loss in the first quarter

It isn’t a surprise that United Airlines posted losses in the first quarter. The COVID-19 crisis has hit the travel industry the most. United Airlines reported a loss of $2.1 billion.

United Airlines’ revenue declined 17% in the first quarter from a year ago to $8 billion. The revenue was lower than analysts’ expectations. Analysts expected revenue of around $8.2 billion. On an adjusted basis, the airline reported roughly a $1 billion loss in the quarter after deducting special charges. President Scott Kirby and CEO Oscar Munoz said, “Travel demand is essentially zero and shows no sign of improving in the near-term. ”

Earlier, United Airlines announced it will cut its international flight schedule by 20% and its US and Canada flight schedule by 10% in April. For May, the company will reduce the schedule by 90%. There will also be a reduction in June if the pandemic continues. Meanwhile, American Airlines will be reducing its international capacity for the summer peak by 10%. The company will also cut its domestic capacity in April by 7.5%.

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On Monday, I discussed how United Airlines announced that it secured $5.0 billion from the federal government in financial aid. The financial aid is part of the Payroll Support Program under the CARES Act. United Airlines stated that it will apply for an additional $4.5 billion in loans as it fights the current crisis. JetBlue also received $935.8 million under the CARES Act, out of which $250.7 million is a low-interest loan.

Impact of COVID-19 on the airline industry

Air-travel demand has hit rock bottom since countries have imposed travel restrictions. Stricter measures are being taken to contain the spread of the virus. As of today, there are 24,78,634 confirmed COVID-19 cases globally. The numbers keep rising in the US. The number of confirmed cases in the US stands at 7,99,515 today.

CNBC reported that United Airlines is the first airline that has discussed the impact of COVID-19 on its financial performance. The company doesn’t expect the demand to rise soon. No one knows when the pandemic will end. Even if the pandemic ends, people might avoid traveling unless necessary for a while. So, the situation might not improve in the near future.

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Delta Airlines will likely report its results for the first quarter of fiscal 2020 on April 22. Analysts expect the company to report a 15.3% YoY (year-over-year) decline in its revenue to $8.8 billion. Sequentially, the revenue could also fall compared to $11.4 billion in the fourth quarter of 2019. Delta could report a loss of $0.74 per share compared to a profit of $0.96 in the same quarter last year.

Spirit Airlines will likely report its results for the first quarter of fiscal on May 7. Analysts expect the company to report YoY (year-over-year) revenue growth to $859.5 million. Sequentially, the revenue could also fall compared to $9698 million in the fourth quarter of 2019. Spirit Airlines could report a loss of $0.39 per share compared to a profit of $0.84 profit in the same quarter last year.

Currently, United Airlines mainly has “hold” ratings on its stock. Meanwhile, the company has seven “buy” and two “strong-buy” recommendations. The average target price on the stock is $51.29, which represents an upside potential of 85% from its last closing price. The stock closed 4.4% lower at $27.79 on April 20. At 6:37 AM ET today in pre-market trading, the stock has fallen by 3.25%.


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