We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
United Continental (UAL) Slips to 52-Week Low: Here's Why
Read MoreHide Full Article
Shares of United Continental Holdings (UAL - Free Report) tumbled to a 52-week low of $56.60 on Nov 14. However, the figure recovered marginally to close the trading session at $57.20, down 1.06% from the closing price of Nov 13.
In fact, shares of the carrier have underperformed the Zacks Airline industry on a year-to-date basis. The stock has been down 21.5%, as against the industry’s growth of 6.2%.
What's Pulling the Stock Down?
United Continental, like its peers such as American Airlines Group (AAL - Free Report) , had to cancel multiple flights due to the recent hurricanes. This is because Harvey has affected United Continental the most as Houston is the carrier’s second-largest hub.
In fact, the carrier’s results in the third quarter of 2017 were also hurt due to Harvey. The company cancelled 8,300 flights due to Harvey, Irma, and Maria. Consequently, its third-quarter pre-tax income was adversely affected to the tune of approximately $185 million.
Moreover, the company's bottom line in the third quarter of 2017 was impacted by the surge in labor and fuel costs. Earnings in the quarter declined 28.6% year over year due to higher costs. However, average fuel price per gallon (on a consolidated basis), excluding hedge losses, increased 14.1% year over year to $1.70. Also, consolidated unit cost or cost per available seat mile (CASM) — excluding fuel, third-party business expenses and profit sharing — increased 2.6% year over year, primarily owing to the labor deals inked by the company.
Passenger unit revenue (PRASM) declined 3.7% in the reported quarter mainly due to the weather-related disruptions. United Continental expects consolidated PRASM to decline between 1% and 3% (year over year) in the final quarter of 2017.
In fact, shares of this Zacks Rank #3 (Hold) stock fell approximately 12% on Oct 19 despite reporting better-than-expected earnings per share and revenues. The lack of clarity provided by the company, on the conference call, pertaining to its efforts to check costs and boost revenues disappointed investors. Consequently, the stock tumbled, registering its biggest one-day percentage decline in the past eight years.
We are also concerned about the capacity overexpansion at United Continental. In fact, on the third-quarter conference call, the company announced that it will continue to expand capacity in a bid to maintain market share at major airport hubs to deal with competition from discount carriers like Spirit Airlines (SAVE - Free Report) .
Load factor (percentage of seats filled by passengers) declined in the quarter as capacity expansion outweighed traffic growth. The metric declined in the month of October as well, due to the same reason.
Shares of Deutsche Lufthansa have gained more than 100% in a year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
United Continental (UAL) Slips to 52-Week Low: Here's Why
Shares of United Continental Holdings (UAL - Free Report) tumbled to a 52-week low of $56.60 on Nov 14. However, the figure recovered marginally to close the trading session at $57.20, down 1.06% from the closing price of Nov 13.
In fact, shares of the carrier have underperformed the Zacks Airline industry on a year-to-date basis. The stock has been down 21.5%, as against the industry’s growth of 6.2%.
What's Pulling the Stock Down?
United Continental, like its peers such as American Airlines Group (AAL - Free Report) , had to cancel multiple flights due to the recent hurricanes. This is because Harvey has affected United Continental the most as Houston is the carrier’s second-largest hub.
In fact, the carrier’s results in the third quarter of 2017 were also hurt due to Harvey. The company cancelled 8,300 flights due to Harvey, Irma, and Maria. Consequently, its third-quarter pre-tax income was adversely affected to the tune of approximately $185 million.
Moreover, the company's bottom line in the third quarter of 2017 was impacted by the surge in labor and fuel costs. Earnings in the quarter declined 28.6% year over year due to higher costs. However, average fuel price per gallon (on a consolidated basis), excluding hedge losses, increased 14.1% year over year to $1.70. Also, consolidated unit cost or cost per available seat mile (CASM) — excluding fuel, third-party business expenses and profit sharing — increased 2.6% year over year, primarily owing to the labor deals inked by the company.
Passenger unit revenue (PRASM) declined 3.7% in the reported quarter mainly due to the weather-related disruptions. United Continental expects consolidated PRASM to decline between 1% and 3% (year over year) in the final quarter of 2017.
In fact, shares of this Zacks Rank #3 (Hold) stock fell approximately 12% on Oct 19 despite reporting better-than-expected earnings per share and revenues. The lack of clarity provided by the company, on the conference call, pertaining to its efforts to check costs and boost revenues disappointed investors. Consequently, the stock tumbled, registering its biggest one-day percentage decline in the past eight years.
We are also concerned about the capacity overexpansion at United Continental. In fact, on the third-quarter conference call, the company announced that it will continue to expand capacity in a bid to maintain market share at major airport hubs to deal with competition from discount carriers like Spirit Airlines (SAVE - Free Report) .
Load factor (percentage of seats filled by passengers) declined in the quarter as capacity expansion outweighed traffic growth. The metric declined in the month of October as well, due to the same reason.
A Key Airline Pick
Investors interested in the airline space may consider Deutsche Lufthansa (DLAKY - Free Report) , which holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Deutsche Lufthansa have gained more than 100% in a year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>