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United Airlines (UAL) Raises Q2 TRASM View, Shares Pop

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United Airlines Holdings (UAL - Free Report) has raised its total unit revenue guidance for the second quarter of 2021 owing to acceleration in ticketed yields as domestic leisure air-travel demand continues to recover from the coronavirus-induced slump. Following this, shares of the company closed yesterday’s trading session 1.5% higher.

In a SEC filing, the airline stated that as of May 25, 2021, “consolidated yields on tickets issued since the beginning of May 2021 for travel in the second quarter 2021 have reached levels similar to 2019, with domestic leisure yields exceeding 2019 levels for the same time period.” Consequently, the company now expects Total Revenue per Available Seat Mile or TRASM to decline approximately 12% in the second quarter of 2021, compared with the same period in 2019. This is an improvement from the carrier’s previous guidance of a decrease of around 20%.

Due to the improved yield performance, United Airlines estimates adjusted EBITDA margin for the second quarter to be around (11%), better than the previous expectation of about (20%). With this, the company expects to achieve positive adjusted EBITDA in June. Further, it hopes to achieve positive adjusted EBITDA in the third quarter of 2021. United Airlines continues to expect domestic leisure yields for summer travel in 2021 to be higher than the 2019 levels.

However, the Chicago, IL-based airline now predicts second-quarter 2021 capacity to fall at least 46% from the 2019 levels, compared with the previous guidance of a decline of approximately 45%. The downside is due to reduction in flights to India and Israel, United Airlines stated. Meanwhile, adjusted operating expenses, excluding special charges, are estimated to drop 33% in second-quarter 2021 from 2019 levels. Previously, the same was expected to fall 32%.

United Airlines gave a heads up that business travel demand continues to be “significantly depressed” despite bookings beginning to recover.

Zacks Rank & Key Picks

United Airlines carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Transportation sector are Covenant Logistics Group (CVLG - Free Report) , C.H. Robinson Worldwide (CHRW - Free Report) and United Parcel Service (UPS - Free Report) . While Covenant Logistics sports a Zacks Rank #1 (Strong Buy), C.H. Robinson and UPS carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Covenant Logistics, C.H. Robinson and UPS have rallied more than 99%, 22% and 100% in a year’s time, respectively.

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