Credit Suisse Negative On United, Expands Q1 PRASM To Guide Lower - United Airlines Holdings (NASDAQ:UAL)

Shares of United Continental Holdings Inc UAL have declined 30.52 percent over the last one year to a low of $45.68 on January 15.
Julie Yates of Credit Suisse has maintained an Outperform rating on the company, while lowering the price target from $87 to $84.
Although investors expect Q1 PRASM guidance to be sequentially worse than Q4, Yates expressed hope that the Q4 earnings season would be “net positive” and ease investor concerns.

According to the Credit Suisse report, “Tone on demand, pricing & capacity are all that matter this earnings season as investors try to determine whether Q1 will finally mark the trough in unit revenue declines and a peak in industry capacity growth.”

Analyst Julie Yates mentioned that there had been signs of weakness in Q4 across the board in the U.S. airlines industry, with several carriers missing initial expectations. The shares in the sector are likely to underperform till investors are confident of a PRASM recovery.

However, Yates also pointed out that Q1 trends appear soft, and despite the shift of Easter from April into March, the shift is unlikely to be much of a tailwind.

Yates also expects United Airlines to cut its Q1 PRASM guidance from (5)–(7)percent to (6)–(8) percent, following the company’s Q4 guidance cut.

“Outsized China & Houston exposure remain key concerns for investors regarding UAL's unit revenue outlook in 2016,” the report added.

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