On Feb 18, we upgraded our recommendation on
United Continental Holdings Inc.
) to Neutral from Underperform, owing to a number of positive
aspects like a smooth and reliable operational base, re-designing
of fleet structure and efficient services. Management's agreement
with the pilot group is also expected to generate long-term
benefits. The stock currently carries a Zacks Rank #3 (Hold).
Why the Upgrade?
Looking ahead, we believe that United Continental is poised to
benefit from its industry-leading unit revenue growth, strong
operational execution, competitive cost structure, capacity
discipline plus fleet and network optimization. The company aims
at strict capacity deployment to maintain a profitable balance
between demand and supply. Management targets capacity reduction
of about 1.5% for 2013, while for the first quarter, it is
expected to decline 4.1% to 5.1%.
We appreciate the company's progress in expanding its on-board
products and services in both domestic and international fleets.
The company continues to improve services and introduce novel
features that will enhance value and profitability by rendering
high customer satisfaction.
With the target to expand its operational wings far and wide,
United Continental is extending its global route network.
Recently, the company announced plans to operate twice-daily
nonstop flights between Denver and Dickinson, North Dakota,
starting Jun 6, 2013. Apart from this, the company will likely
start operations across domestic markets including Fayetteville,
North Carolina and Santa Fe, New Mexico.
However, fourth quarter loss plus not-so-favorable factors such
as fuel price instability, high non-fuel expenses, competitive
threats, fluctuations in passenger and cargo demand along with
sluggish economic conditions make us cautious on the stock.
Other stocks operating within the airline sector that are worth
Delta Air Lines Inc.
Deutsche Lufthansa Aktiengesellschaft
Republic Airways Holdings Inc.
). All the 3 firms currently hold a Zacks Rank #1 (Strong
DELTA AIR LINES (DAL): Free Stock Analysis
(DLAKY): ETF Research Reports
REPUBLIC AIRWAY (RJET): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
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