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United Airlines Could Report Steep Losses in Q2

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United Airlines will likely report its earnings for the second quarter of fiscal 2020 on Wednesday after the market opens. Airlines’ earnings season started with Delta Air Lines’ second-quarter results on July 14. The company reported wider-than-expected losses. Wall Street estimates show that United will likely report steep losses in the second quarter. The revenue could also decline significantly in the quarter. The second quarter could show some significant damage from the COVID-19 pandemic. The lockdown and air travel restrictions were stricter after March. 

What do analysts expect from United Airlines?

Airline demand started picking up amid easing restrictions but it is not enough to cover the losses. The demand was down for the second quarter as COVID-19 cases kept spiking globally. Analysts expect the second-quarter revenue to be around $1.3 billion—down 88.4 percent YoY (year-over-year). Sequentially, the revenue could also fall from $7.9 billion in the first quarter. Analysts hope that the revenue will start to increase slowly over the next few quarters. For the third quarter, the revenue could be around $3.2 billion and $5.3 billion for the fourth quarter. The revenue could decline by 58.7 percent to $17.8 billion for fiscal 2020.

For the second quarter, United Airlines could report a loss of $9.02 per share compared to a profit of $4.21 per share in the second quarter of fiscal 2019. There is hope that the losses could eventually decline. The losses could be around $5.8 per share in the third quarter and $2.8 per share in the fourth quarter. For fiscal 2020, United Airlines’ losses could be around $19.7 billion. The airline reported a profit of $12.05 per share in fiscal 2019.

American and Southwest Airlines will also report their second-quarter earnings this week. For American Airlines, analysts expect the second-quarter revenue to be around $1.4 billion—a decline of 87.9 percent YoY. The company could report a loss of $7.56 per share compared to a profit of $1.82 per share in the second quarter of 2019. Analysts estimate that Southwest Airlines could see its revenue decline 85.7 percent YoY to $845.2 million. The losses could be around $2.56 per share for the second quarter.

What do analysts think of United Airlines stock?

United has been working to improve its liquidity position to survive the COVID-19 crisis. Currently, 19 analysts cover United Airlines stock. Among the analysts, 12 recommend a hold, five recommend a buy, and two recommend a strong-buy. The consensus target price on the stock is $41.27, which depicts a 22 percent upside from the closing price on July 17. The stock closed 1.6 percent lower at $33.9 on July 17. American Airlines has a consensus hold and sell recommendation with a target price of $12.47. Analysts are divided between eight buy and eight hold recommendations for Southwest. The airline has a target price of $41.65 for the next 12 months.

Most of the stocks got a boost after Moderna announced the results for its COVID-19 vaccine’s Phase 1 clinical trial study on July 14. The positive news from the trial increased the hope of a cure soon, which boosted most stocks. As a result, airline stocks also surged. For the week ended July 17, United Airlines and Southwest stock rose 3.8 percent and 2.7 percent, while American Airlines stock fell 0.25 percent.

United stock is down 1.5 percent in July, while Southwest has gained 0.95 percent. Most analysts favor Southwest Airlines. CNBC host Jim Cramer likes the airline’s strong balance sheet. Recently, Goldman Sach upgraded Southwest Airlines stock to a buy. So far, American Airlines stock has declined 7.0 percent in July.

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