NEW YORK (TheStreet) -- Shares of United Continental Holdings (UAL) are declining by 0.18% to $67.30 in pre-market trading Friday, after analysts at UBS said the company is now its "top pick" among U.S. airlines.
The firm raised its price target to $90 from $87, and said they believe its margin deficit provides opportunity for better earnings and free cash flow growth than its peers.
Also UBS noted that United Continental's labor risk is further out compared to other airlines.
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A couple weeks ago, the airline reported an upbeat monthly operational performance report. The company said that consolidated air traffic, or revenue per passenger mile, was up 1.1% in January while its consolidated capacity, or available seat miles rose 1.4% year over year.
The company also noted the recent rally in oil prices would force it to pay more for fuel in the first quarter than it had previously expected.
Crude oil futures are higher this morning as Brent is positioned for its first monthly gain since July of 2014, helped by strong investor inflows as well as an improving demand outlook and supply outages, Reuters reports.
Chicago, IL-based United Continental Holdings is a holding company operating under its subsidiaries United Air Lines and Continental Airlines.
The company transports people and cargo through its mainline operations, and has contractual relationships with various regional carriers to provide regional jet and turboprop service branded as United Express.
Separately, TheStreet Ratings team rates UNITED CONTINENTAL HLDGS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate UNITED CONTINENTAL HLDGS INC (UAL) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, UAL's share price has jumped by 52.70%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- UNITED CONTINENTAL HLDGS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, UNITED CONTINENTAL HLDGS INC increased its bottom line by earning $2.79 versus $1.30 in the prior year. This year, the market expects an improvement in earnings ($11.58 versus $2.79).
- UAL, with its decline in revenue, underperformed when compared the industry average of 22.9%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for UNITED CONTINENTAL HLDGS INC is currently lower than what is desirable, coming in at 25.80%. 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 0.30% trails the industry average.
- The change in net income from the same quarter one year ago has exceeded that of the Airlines industry average, but is less than that of the S&P 500. The net income has significantly decreased by 80.0% when compared to the same quarter one year ago, falling from $140.00 million to $28.00 million.
- You can view the full analysis from the report here: UAL Ratings Report