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United Continental Up 12% in 6 Months: More Upside Left?

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Shares of United Continental Holdings, Inc. (UAL - Free Report) have rallied 12.4% in the last six months, outperforming the Zacks Airline industry’s gain of 7.9%.

 

Let’s take a look into the factors responsible for the impressive price performance and see if the company can add new feathers to its cap.

United Continental is being aided by the robust improvement in passenger revenues owing to strong demand for air travel. Additionally, its projection on unit revenues for the first quarter of 2018 is encouraging. Passenger unit revenues are expected to increase between 1% and 3% in the current quarter. The company expects pre-tax margin to be in the range of 0% to 2%. The projected range compares favorably with the earlier forecast of the metric being flat.

The company expects a CAGR of approximately 25%, with respect to its bottom line in the 2018-2020 time frame. We are also impressed by United Continental's efforts to reward its shareholders. The company has repurchased stock worth $553 million in the final quarter of 2017. Moreover, in December 2017, its board of directors cleared an additional share repurchase program worth $3 billion. The company's trailing 12-month return on equity (ROE) of 23.4% supports its growth potential. The S&P 500's ROE stands at 16%, testifying to the company’s efficient usage of shareholders’ funds.

Furthermore, United Continental's efforts to expand its operations are noteworthy. To this end, the carrier recently announced the strengthening of its relationship with Air New Zealand. Under the new deal, flights connecting Chicago and Auckland will be operational from Nov 30, 2018.

United Continental also announced that its flights connecting San Francisco and Auckland, which currently operate on a seasonal basis, will fly throughout the year (thrice a week) from April 2019. Moreover, efforts to modernize its fleet raise optimism on the stock. The company is constantly adding more efficient planes to its fleet and removing outdated ones.

Estimate Revisions & Style Score

Upward estimate revisions reflect confidence in a stock’s prospects. United Continental scores impressively on this front too. In fact, this Zacks Rank #2 (Buy) company has seen the Zacks Consensus Estimate for current-quarter and year earnings being revised 180% and 3.9% upward, respectively, in the last 30 days.

Additionally, the stock has a VGM Score of B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.

Such a score allows investors to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

Other Stocks to Consider

Investors interested in the broader Zacks Transportation sector may also consider Triton International Limited , Ryanair Holdings plc (RYAAY - Free Report) and The Greenbrier Companies, Inc. (GBX - Free Report) . All these three stocks carry the same bullish rank as United Continental. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Triton International has an impressive earnings history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 10%.

Ryanair has an impressive expected earnings per share growth rate (three to five years) of 17.8%.

The Greenbrier Companies has an impressive earnings track record, having surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 17%.

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