Morgan Stanley Thinks United Airlines' Strong Guidance Is Achievable

• Morgan Stanley analyst Ravi Shanker reiterated an Overweight rating on the shares of United Airlines Holdings Inc (NASDAQ: UAL) with a price target of $67.00.

• Q4 was a big beat despite being the most impacted airline from a weather perspective, said the analyst.

• United delivered a 9% pre-tax margin in the quarter by effectively navigating the winter storm despite having more exposure to it than any other airline, added the analyst.

• The management has previously said that corporate had plateaued toward the end of the year, which they now attributed to corporates running out of travel budgets, said the analyst.

• However, like Delta Air Lines Inc (NYSE: DAL), management has seen a strong start to 2023 in January and booked revenue in 2H February/March is running 30-40% above 2019 levels.

• FY23 guidance came in merely 70% above consensus, mentioned the analyst.

• The big debate right after the guidance dropped was whether the FY23 expectation was artificially inflated by a low fuel guide at $2.85- 2.90/gal and DAL's assumption of $3.00- 3.20/gal, the analyst said.

• However, the analyst does not believe this is a major issue as jet fuel price has been extremely volatile, and it is tough to accurately mark to market it week by week.

• Also, management believes that jet fuel cost is effectively an industry pass-through, especially at current industry conditions, to which the analyst agrees.

• CEO Kirby passionately called out the industry to acknowledge structural capacity constraints.

• Management believes that capacity constraints across the industry are long-term structural challenges and are unlikely to normalize any time soon.

• Price Action: UAL shares are trading lower by 1.88% at $47.94 on the last check Thursday.

• Photo Via Company

Latest Ratings for UAL

Date	Firm	Action	From	To
Jan 2022	Raymond James	Maintains		Outperform
Jan 2022	Barclays	Maintains		Equal-Weight
Sep 2021	Morgan Stanley	Maintains		Equal-Weight

View More Analyst Ratings for UAL

View the Latest Analyst Ratings

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