United Airlines Reports Massive Loss: Was Buffett Right to Sell?

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Oct. 15 2020, Updated 3:23 a.m. ET

The airline sector has been among the worst affected by the COVID-19 pandemic. When Warren Buffett announced in May that he had sold all of his holdings in airline companies, many criticized the Oracle of Omaha. However, airlines' recent earnings results seem to prove that Buffett was right—both Delta and United Airlines have reported massive losses. Here are the key highlights from United Airlines’ earnings call.

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United Airlines' Earnings Call
Source: Getty Images

When did United Airlines report earnings?

United Airlines reported its third-quarter earnings on Wednesday, Oct. 14. Its revenue came in at $2.50 billion, in line with analysts' estimates, but 78.1 percent lower year-over-year. Its passenger revenue fell even more, by 84.3 percent.

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United Airlines’ earnings report highlights

United Airlines posted a net loss of $1.8 billion and an adjusted net loss of $2.4 billion. Its adjusted EPS of $8.16 were worse than the $7.53 that analysts were forecasting. Delta Air Lines also posted a massive $5.4 billion net loss in the third quarter. Combined, United and American Airlines have announced 32,000 furloughs, as Congress hasn’t yet approved the next stimulus for the ailing U.S. airline industry.

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United Airlines CEO Scott Kirby called the pandemic “the worst financial crisis in aviation history.” However, more optimistically, he added, “Even though the negative impact of COVID-19 will persist in the near term, we are now focused on positioning the airline for a strong recovery.” That road to recovery looks bumpy.

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What is United Airlines’ stock price today?

United Airlines stock closed at $35.61 on Oct. 14. The stock was trading 0.8 percent higher in premarket trading today. The stock has fallen almost 60 percent year-to-date, and is among the 10 stocks in the S&P 500 that have lost the most.

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United Airlines’ dividend

In March, United Airlines suspended its dividend and share buybacks. Many companies have either lowered their dividends or suspended them all together to conserve cash. Delta, Southwest, and American have all suspended their dividends. Given the severe crisis, it could be a long time before airlines reinstate dividends.

United Airlines’ stock forecast

According to data compiled by CNN, analysts' median price target for United Airlines is $40, which implies a 12.3 percent upside. Their highest price target of $60 is 69 percent higher than its current price, while their lowest price target of $32 is 10.1 percent lower. Of the 21 polled analysts, 12 rate United Airlines stock as a “hold,” one as “underperform,” and eight as a “buy” or higher rating.

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