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TheStreet Open House

Why United Continental (UAL) Stock Is Soaring Today

Stocks in this article: UAL

NEW YORK (TheStreet) -- Shares of United Continental Holdings Inc. (UAL) are higher by 3.96% to $47.83 in mid-morning trading on Monday, as airline stocks take off as a result of lower oil futures prices.

Brent crude fell on Monday by almost $2, trading below $102 a barrel, as Libya accelerated its oil output and concerns regarding supplies from Iraq eased, Reuters reports.

Brent crude for October delivery declined by $1 to almost $102 per barrel and U.S. crude for September delivery was also down by $1 to near $96 a barrel, Reuters added.

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Other airline stocks rising today include American Airlines (AAL) , up 3.62% to $40.61, Delta Airlines (DAL) , higher by 2.70% to $39.57, and Southwest Airlines (LUV) , up by 2.62% to $30.54.

Separately, TheStreet Ratings team rates UNITED CONTINENTAL HLDGS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate UNITED CONTINENTAL HLDGS INC (UAL) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • UNITED CONTINENTAL HLDGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, UNITED CONTINENTAL HLDGS INC turned its bottom line around by earning $1.30 versus -$2.32 in the prior year. This year, the market expects an improvement in earnings ($4.51 versus $1.30).
  • The revenue growth significantly trails the industry average of 50.5%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Airlines industry and the overall market on the basis of return on equity, UNITED CONTINENTAL HLDGS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The gross profit margin for UNITED CONTINENTAL HLDGS INC is currently lower than what is desirable, coming in at 27.53%. Regardless of UAL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.63% trails the industry average.
  • The debt-to-equity ratio is very high at 3.68 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, UAL has a quick ratio of 0.56, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • You can view the full analysis from the report here: UAL Ratings Report
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