United Continental Gains On Passenger Revenues & Buybacks
Zacks Investment Research | Mar 03, 2019 08:47PM ET
We have recently issued an update research report on United Continental Holdings, Inc. (NASDAQ:UAL) . Robust passenger revenues owing to strong demand for air travel buoy optimism on the stock.
The Chicago, IL-based carrier is being aided by strong demand for air travel. As a result of higher demand, passenger revenues, which contribute significantly to the top line, increased 9.4% in 2018. Robust traffic growth has resulted in load factor (percentage of seats occupied by passengers) increasing for eight consecutive months. Also, the company's performance with respect to unit revenues is encouraging.
We are positive on the company’s application to operate daily nonstop flights from six U.S. international airports to Tokyo Haneda Airport (HND). The flights are expected to be operational by summer 2020. With the Olympics scheduled to be held in Tokyo in 2020, the routes are likely to generate substantial traffic for the carrier.
Moreover, we are impressed by the carrier's bullish guidance for 2019 earnings. United Continental expects earnings per share in the band of $10-$12, higher than the $9.13 per share reported in 2018. Also, efforts to modernize and expand fleet size raise optimism in the stock. Toward this end, it is replacing outdated planes and adding new ones to its fleet. Evidently, the carrier finalized an order for 24 additional Boeing (NYSE:BA) 737 MAX jets in December 2018. The planes will bolster the carrier’s fleet from 2020 onward.
Furthermore, we are positive about United Continental's efforts to reward shareholders through buybacks. During the fourth quarter and 2018, the carrier repurchased shares worth $240 million and $1.25 billion, respectively. Its employee-friendly attitude is also commendable. Moreover, the company’s efficient cost management is impressive. The airline expects to continue its prudent cost-management strategy going forward.
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