United Has 75% Upside, Buckingham Research Says

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  • Shares of United Continental Holdings Inc UAL have declined 11.96 percent, touching a low of $50.78 on October 6.
  • Daniel McKenzie of The Buckingham Research Group has maintained a Buy rating and price target of $98 on the company.
  • McKenzie believes that the stock has 75 percent upside, while mentioning that it is the “cheapest stock in the sector,” and that the investors might be underappreciating its margin story.

Analyst Daniel McKenzie mentioned that while the company marginally missed the 3Q15 expectations, its 4Q15 guidance offset this small miss.

“Mgmt's PRASM outlook for 4Q15 strikes us as having a bit of conservatism given sequentially slower growth internationally, with trims to China, Brazil, and Japan, as well as domestic cuts on the transcon markets,” McKenzie said.

According to the Buckingham Research report, United Continental’s fleet restructuring has been driving greater efficiency across the company’s network, while operating improvements have also been helping with better efficiency, with 30,000 lesser cancelled flights in 2015, as compared to 2014.
United Continental has recently announced share buybacks worth $3 billion, which is equivalent to 15 percent of the company’s market cap. However, almost all of the $3 billion is still to be used for buybacks.

“It's admittedly hard to quantify, but we believe an opportunity exists to better tap into China's interior flow traffic via its code share partner, Air China,” McKenzie stated, while adding that the company’s international growth was expected to slow down in the near term.

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Posted In: Analyst ColorReiterationAnalyst RatingsDaniel McKenzieThe Buckingham Research Group
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