This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

United Analysts Rush to Reduce Estimates on Weak Outlook

CHICAGO (TheStreet) -- JPMorgan analyst Jamie Baker downgraded United (UAL) on Friday, saying he anticipates a fourth-quarter loss and doesn't see good value by comparison with other airlines. A number of other analysts joined Baker in reducing estimates.

Baker's downgrade came after an unusual earnings call that online travel commentator Joe Brancatelli called an "excuse-a-thon." Brancatelli wrote on Twitter that executives including CEO Jeff Smisek left out one excuse: "The dog ate Smisek's spreadsheet."

United shares closed Thursday at $31.30, up 34% for the year. Shares were falling 3.3% to $30.27 on Friday.

Baker downgraded the shares to underweight and reduced his price target to $25 from $32.50. He said he views 2014 consensus estimates as too high and likely to diminish. Analysts surveyed by Thomson Reuters were estimating 2014 earnings at $4.02 as of Friday morning. Baker said he once expected earnings of $5.40 a share "but we were unprepared for UAL's underwhelming guidance."

Baker noted that other airlines offer more compelling investment opportunities. Based on his revised forecasts, United trades at 13 times 2014 earnings, while Delta (DAL) trades at 10X earnings and US Airways (LCC) trades at 6X earnings. "Our expectations ask little of Delta's or US Airways' management aside from staying the course and maintaining momentum, (while) even our reduced expectations for United require relatively heavy lifting by management," he wrote.

In United's earnings release on Thursday, Smisek promised prompt action. But the level of action outlined on the earnings call was underwhelming.

On the call, executives enumerated three problems during the third quarter: 1) inaccurate demand forecasts led United to book too many low-yield tickets early in the quarter, reducing the opportunity to sell tickets closer-in at higher yields; 2) the Boeing 747 fleet was assigned to San Francisco to enable more preventive maintenance at the San Francisco maintenance base, diminishing the opportunity to deploy 747s elsewhere; and 3) the competitive pressure on China routes mounted due to increased capacity.

Other analysts were more sympathetic than Baker was, but at least four others joined him in reducing estimates. Wolfe Research Analyst Hunter Keay wrote Friday that United's passenger revenue per available seat mile guidance "of a 1% year over year decline in the fourth quarter resulted in a massive cut to our estimates, but the guide was accompanied with a sense of urgency and a plan to fix it."

Deutsche Bank analyst Mike Linenberg said he had expected a 2013 recovery for United, but now will wait until 2014. "Our call was that 2013 would be United's year to shine," Linenberg wrote in a report on Thursday. "We might have been premature in our thesis, considering that United's margins have been below the industry's average for the last few quarters.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,912.11 -70.48 -0.42%
S&P 500 1,969.95 -8.96 -0.45%
NASDAQ 4,442.6980 -2.2110 -0.05%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs