Proactive Investors - United Airlines (NASDAQ:UAL) Holdings Inc (NASDAQ:UAL) shares traded more than 6% higher as the airline’s warning that its losses this quarter will be greater than expected due to the latest grounding of Boeing (NYSE:BA) jets was outweighed by investor optimism over the company’s prospects for the remainder of the year.
The airline said that due to the Boeing problems, it now expects a loss in the range of $0.35 to $0.85 per share in its first quarter of 2024, assuming its MAX 9 planes are grounded until the end of January.
MAX 9 flights were halted indefinitely by US authorities on 5 January after a door blew off on an Alaska Air flight.
The airline has 79 jets grounded currently. Between them, United and Alaska account for 70% of the MAX 9 fleet with thousands of flights cancelled since the incident.
US regulator the Federal Aviation Administration (FAA) has also ordered inspections of the door plugs on another of Boeing’s planes, the 737- 900ER.
United has 136 of these and said it has found no issues on the two-thirds of the fleet it has inspected so far.
In the fourth quarter of 2023, United posted a profit of $800 million or $2 per share, well ahead of forecasts of $1.65, on revenues of $13.6 billion that it said were buoyed by strong holiday demand.
For 2023 overall, net income was $2.6 billion.
Analysts at the Bank of America (NYSE:BAC) (BoA) wrote in a note to clients that United’s 4Q earnings beat and 2024 earnings per share (EPS) guidance of $9 to $11 per share, above the consensus estimate of $9.54, were key to giving investors confidence in the company.
They added that the airline’s first quarter revenue outlook indicates continued outperformance.
“The 1Q 2024 unit revenue outlook of flat (or slightly down excluding an accounting charge) is better than the consensus and our expectations of down around 2% and better than Delta’s flat to negative 3% outlook,” they wrote.
“This likely continues United’s unit revenue outperformance versus the industry despite what will be greater than industry capacity growth even after adjusting for the 737 MAX 9 grounding.”
The BoA analysts reiterated their ‘Buy’ rating on the stock and awarded it a $65 price objective.
United stock was up 6.2% at US$40.82 on Tuesday afternoon.