On Wednesday, Deutsche Bank updated its view on United Continental (NASDAQ: UAL) shares, raising the airline's price target to $80.00 from the previous $60.00. The firm maintained its Buy rating on the stock. United Continental's third-quarter earnings per share (EPS) of $3.33 surpassed both Deutsche Bank's estimate of $3.10 and the consensus figure of $3.07. This performance exceeded the company's own guidance range of $2.75 to $3.25.
The analyst noted that United achieved these results despite a significant operational challenge. The company faced approximately 2,600 flight cancellations at its mainline and regional partners over a span of five days due to an incident involving CrowdStrike (NASDAQ:CRWD).
The disruptions were estimated to have a $100 million negative impact on United's bottom line. For comparison, Delta Airlines (NYSE:DAL) experienced around 7,000 cancellations during the same period, which reportedly affected its bottom line by $500 million.
United's ability to surpass earnings expectations in the face of adversity was highlighted by the analyst. The airline's revenue diversity played a key role in mitigating the effects of weaker performance in certain regions. While operations in the Middle East and China faced challenges, the strength in other parts of its network, such as southern Europe and Japan, helped to compensate for these difficulties.
The analyst's remarks underscore the resilience of United's business model, which allowed the airline to deliver strong financial results even when confronted with unexpected setbacks. The adjustment in the price target reflects confidence in United's capacity to navigate operational challenges and capitalize on the robust areas of its global network.
The rise in the price target for United Continental shares follows the company's demonstration of robust earnings and an effective strategy for dealing with disruptions. The airline's ability to exceed earnings expectations and manage the impact of cancellations has been recognized by Deutsche Bank in its updated assessment.
In other recent news, United Airlines has recently reported encouraging financial outcomes for Q3, surpassing expectations with pre-tax earnings of $1.3 billion and an adjusted EPS of $3.33. The airline's performance was likely aided by lower fuel costs and robust domestic growth. Barclays maintains an Overweight rating on United's stock, predicting a strong Q4 report driven by these factors.
United Airlines has also announced a new $1.5 billion share repurchase program, signaling its confidence in its financial health. This move represents about 7% of the company's market cap and is the first buyback program since the onset of the COVID-19 pandemic. These are recent developments providing investors with insights into the current state of United Airlines.
Furthermore, United Airlines has projected a stronger profit for the current quarter, with an adjusted profit expectation ranging from $2.50 to $3 per share, surpassing the average analyst forecast. The airline has noted positive domestic unit revenue figures for August and September, indicating an increase in pricing power compared to the same period last year.
Finally, United Airlines has announced a significant expansion of its international flight schedule for summer 2025, including eight new destinations. However, escalating tensions in the Middle East have led the airline to adjust its flight schedules, affecting services to and within the region.
InvestingPro Insights
United Continental's strong performance, as highlighted by Deutsche Bank, is further supported by recent data from InvestingPro. The company's P/E ratio of 7.13 and adjusted P/E ratio of 6.67 for the last twelve months as of Q2 2024 suggest that the stock is trading at a relatively low earnings multiple. This aligns with an InvestingPro Tip indicating that UAL is "Trading at a low P/E ratio relative to near-term earnings growth."
The company's financial health is reflected in its impressive revenue of $55.63 billion for the last twelve months as of Q2 2024, with a revenue growth of 9.34% over the same period. This robust top-line performance has translated into a strong bottom line, with a diluted EPS from continuing operations of $8.82.
InvestingPro Tips also point out that UAL has seen "Strong return over the last month" and is "Trading near 52-week high," which corroborates Deutsche Bank's bullish outlook. The stock's 1-month price total return of 24.76% and its current price at 98.51% of its 52-week high underscore this positive momentum.
For investors seeking more comprehensive analysis, InvestingPro offers 16 additional tips for United Continental, providing a deeper understanding of the company's financial position and market performance.
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