Imperial Capital Bullish On United Following 18% 2016 Selloff
Shares of United Continental Holdings Inc (NYSE: UAL) have lost 18 percent year to date. The company has a number of strengths and its problems are “fixable,” Imperial Capital’s Michael Derchin said in a report. He initiated coverage of United with an Outperform rating and a price target of $57.
Derchin cited the key strengths of United as:
- Great domestic hubs in San Francisco, Newark, Houston, Denver and Chicago
- An Asia Pacific footprint is larger than many of its peers
Moreover, the company is generating significant FCF, while also investing in the business. The analyst estimated $2.8 billion in FCF in FY16.
United has faced challenges after its merger with Continental Airlines in October 2010, Derchin pointed out. He added, however, that the recent appointments of CFO Andrew Levy and Chief Commercial Officer Julia Haywood would likely improve United’s “problem solving skills,” while providing “an entrepreneurial bent, which, in our view, were attributes in short supply at this “mega-carrier” in recent years.”
United has received ratification of a new labor contract by flight attendants, following an extended period of negotiations after the merger. This development should “finally permit integration of United and Continental workers, which we expect to improve morale and productivity,” the analyst wrote.
Moreover, in case mechanics also ratify the recent agreement reached with the Teamsters union, “UAL’s goal of having long-term contracts in place with all key unions should also be finally realized,” the Imperial Capital report noted.
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Latest Ratings for UAL
|Jan 2017||Morgan Stanley||Downgrades||Overweight||Equal-Weight|
|Jan 2017||Cowen & Co.||Downgrades||Outperform||Market Perform|
|Dec 2016||Barclays||Initiates Coverage On||Overweight|
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