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Here's Why You Should Retain United Airlines (UAL) Stock Now
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United Airlines Holdings, Inc. (UAL - Free Report) is currently benefiting from its solid air-travel demand and modernizing its fleet. However, a low current ratio is a headwind.
Factors Favoring UAL
Owing to buoyant air-travel demand, United Airlines posted a significant year-over-year increase (about 51.1%) in first-quarter 2023 revenues. The massive year-over-year increase in the top line was driven by a 61.8% rise in passenger revenues (contributing 89.8% to the top line) to $10,274 million.
Owing to robust air-travel demand, UAL expects revenues for the June quarter to rise 14-16% year over year. Driven by the rosy scenario with respect to air-travel demand, it expects second-quarter earnings per share in the $3.50-$4.00 band. For 2023, UAL expects earnings per share in the $10-$12 band.
In a bid to modernize its fleet, United Airlines placed the largest 787 Dreamliner order to Boeing in December 2022. UAL will purchase 100 Boeing 787 Dreamliners, with options to buy 100 more.
UAL anticipates receiving the delivery of the new widebody planes between 2024 and 2032. The new jets are expected to result in a 25% improvement pertaining to fuel usage compared with the older Boeing 767 widebodies and some 777s that will be placed.
As a result of this massive deal, significant job opportunities for pilots, flight attendants and maintenance technicians, among others, are also likely to be created.
Key Risks
The decline in current ratio (a measure of liquidity) does not bode well for the company. The carrier exited the first quarter of 2023 with a current ratio of 0.91, down from the reading of 1 in fourth-quarter 2022. A reduction in this key ratio generally suggests that the company's ability to generate cash is on the decline.
Zacks Rank
UAL currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Allegiant Travel Company (ALGT - Free Report) .
Copa Holdings, flaunting a Zacks Rank #1 (Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 919% and 89% surge, respectively, on a year-over-year basis.
Allegiant, currently carrying a Zacks Rank #2 (Buy), is seeing a steady recovery in air-travel demand. In first-quarter 2023, operating revenues grew 29.9% on a year-over-year basis.
ALGT has a strong liquidity position. Cash and cash equivalents of $317.6 million at first-quarter 2023 end was higher than the current debt of $289.7 million. This implies that the company has enough cash to meet its debt burden.
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Here's Why You Should Retain United Airlines (UAL) Stock Now
United Airlines Holdings, Inc. (UAL - Free Report) is currently benefiting from its solid air-travel demand and modernizing its fleet. However, a low current ratio is a headwind.
Factors Favoring UAL
Owing to buoyant air-travel demand, United Airlines posted a significant year-over-year increase (about 51.1%) in first-quarter 2023 revenues. The massive year-over-year increase in the top line was driven by a 61.8% rise in passenger revenues (contributing 89.8% to the top line) to $10,274 million.
Owing to robust air-travel demand, UAL expects revenues for the June quarter to rise 14-16% year over year. Driven by the rosy scenario with respect to air-travel demand, it expects second-quarter earnings per share in the $3.50-$4.00 band. For 2023, UAL expects earnings per share in the $10-$12 band.
In a bid to modernize its fleet, United Airlines placed the largest 787 Dreamliner order to Boeing in December 2022. UAL will purchase 100 Boeing 787 Dreamliners, with options to buy 100 more.
UAL anticipates receiving the delivery of the new widebody planes between 2024 and 2032. The new jets are expected to result in a 25% improvement pertaining to fuel usage compared with the older Boeing 767 widebodies and some 777s that will be placed.
As a result of this massive deal, significant job opportunities for pilots, flight attendants and maintenance technicians, among others, are also likely to be created.
Key Risks
The decline in current ratio (a measure of liquidity) does not bode well for the company. The carrier exited the first quarter of 2023 with a current ratio of 0.91, down from the reading of 1 in fourth-quarter 2022. A reduction in this key ratio generally suggests that the company's ability to generate cash is on the decline.
Zacks Rank
UAL currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Allegiant Travel Company (ALGT - Free Report) .
Copa Holdings, flaunting a Zacks Rank #1 (Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 919% and 89% surge, respectively, on a year-over-year basis.
Allegiant, currently carrying a Zacks Rank #2 (Buy), is seeing a steady recovery in air-travel demand. In first-quarter 2023, operating revenues grew 29.9% on a year-over-year basis.
ALGT has a strong liquidity position. Cash and cash equivalents of $317.6 million at first-quarter 2023 end was higher than the current debt of $289.7 million. This implies that the company has enough cash to meet its debt burden.