United Continental (UAL) Stock Falls on Ratings Downgrade

United Continental (UAL) stock is declining in pre-market trading after Credit Suisse cut its rating to 'neutral.'
By Rachel Graf ,

NEW YORK (TheStreet) -- Shares of United Continental (UAL) - Get Report are down 2.21% to $39.40 in pre-market trading on Wednesday following a ratings downgrade to "neutral" from "outperform" at Credit Suisse in a note released earlier today. 

The firm cut its price target to $42 from $64 on shares of the Chicago-based airline operator.

Free cash flow generation will fade in 2017 as aircraft capital expenditures increase, and the pre-tax margin gap will widen as "generous labor deals" are ratified and unit revenues remain pressured, Credit Suisse contended. 

"Fading free cash generation slows further delevering progress and stifles the prospect that buybacks continue anywhere near the 2016 level," the firm added.

Management is headed in the right direction as it addresses the causes of financial underperformance and outlines revenue and cost initiatives to drive incremental benefits by 2018, according to Credit Suisse. But the firm is "skeptical" of what portion of the earnings initiatives will "make their way to the bottom line."

Separately, TheStreet Ratings team rates the stock as a "buy" with a ratings score of B-.

United Continental's strengths such as its notable return on equity and attractive valuation levels. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

You can view the full analysis from the report here: UAL

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author. 

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