Shares of United Continental Holdings, Inc. (UAL - Free Report) have fared well in a year’s time. The stock has gained 21.1% against the industry’s decline of 27.3%.
Reasons for Impressive Price Performance
This Chicago, IL-based airline company has an impressive surprise history. It beat estimates in three of the trailing four quarters, the average being 2.7%.
United Airlines, a subsidiary of United Continental, is being aided by strong passenger revenues on the back of solid demand for air travel. Such robust passenger revenues aided this carrier to generate impressive traffic growth. At the end of the first 11 months of 2018, it registered a 6.4% increase in revenue passenger miles (RPMs: a measure of traffic) to 210.83 billion while available seat miles (ASMs: a measure of capacity) climbed 4.8% to 251.89 billion, both on a year-over-year basis. As a result, load factor (percentage of seats filled by passengers) improved 130 bps to 83.7%. Strong passenger revenues should boost the top line in the fourth quarter of 2018. A lower tax rate should aid results as well.
Furthermore, we are impressed by this carrier's bullish guidance for current-year earnings. United Continental now expects earnings in 2018 between $8 and $8.75 per share (earlier outlook projected earnings of $7.25 to $8.75 per share in 2018). The carrier is well on track to achieve its 2020 adjusted earnings per share guidance of $11-$13.
Moreover, United Airlines’ efforts to expand its operations raise optimism on the stock. In December 2018, it announced the largest international route expansion in San Francisco. As part of the move, the carrier will start operating a second flight (four times a week) from Apr 1, 2019, connecting Seoul and San Francisco. In 2019, the carrier will start year-round nonstop service to Amsterdam, Auckland and Tahiti from San Francisco.
Additionally, in November 2018, the carrier inked a joint business agreement with Copa Holdings (CPA - Free Report) and Avianca (including several of its affiliates) to bolster its Latin American presence. The company is adding new flights constantly, in line with its expansion motive. Additionally, we are encouraged by its efforts to reward shareholders in the form of share buybacks.
Bullish Readings & Zacks Rank
The positivity around this Zacks Rank #2 (Buy) stock can be gauged from the Zacks Consensus Estimate being revised 5.1% upward in the past 60 days for current-quarter earnings.
United Continental flaunts an impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of all three scores.
Other Stocks to Consider
Investors interested in the Zacks Transportation sector may also consider some other top-ranked stocks, including Azul S.A. (AZUL - Free Report) and Spirit Airlines, Inc. (SAVE - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Azul and Spirit Airlines have gained 49.7% and 50.8% in the past six months, respectively.
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