United Airlines (UAL) stock edged up amid news that the airline plans to furlough 16,370 workers in October. That is fewer than half the number in the airline's July prediction.
The reduced furlough would be possible due to 7,400 employees taking buyouts or early retirement. And as many as another 20,000 reduced their work schedules or took unpaid leaves.
A United executive told reporters that the Chicago-based airline does not expect air travel volume to return to normal until a vaccine for Covid-19, the disease caused by coronavirus, is widely available.
In the closing days of August, the airline ended its hated $200 fee for changing a ticket for travel within the U.S. That move to lure skittish passengers back aboard its planes beat rival airlines.
United Airlines Stock Rose
United Airlines Stock rose four of the past five trading days.
A day later United dropped its ticket change fee, American Airlines (AAL) and Delta Airlines (DAL) followed suit, dropping their $200 change fees on domestic flights. American's move covers flights to Canada, Mexico and the Caribbean as well. Alaska Airlines waived its $125 change fee on Tuesday. Southwest (LUV) does not charge change fees.
United's change fee had applied to standard and premium economy tickets for U.S. travel. United waived its change fee through Dec. 31 on the lowest fares, called "basic economy."
The Chicago-based airline also said, starting Jan. 1, 2021, passengers will be allowed to fly standby at no cost on another flight departing the same day as their booked flight no matter the type of ticket or class of service.
United waived some other fees as well.
United also sees good news regarding the Boeing 737 Max aircraft. The European Union Aviation Safety Agency (EASA) said it would begin certification tests of the revamped Max aircraft, starting Sept. 7. The tests will take place in Vancouver, Canada.
The 737 Max's sensors and flight control system are being reworked in the wake of two high-profile crashes. U.S. regulators began similar tests two months ago.
United Airlines Stock Rises On Test Flight News
The EASA said it was cooperating with Boeing and the U.S. Federal Aviation Administration (FAA) to enable the 737 Max to return to service quickly but only once it is deemed safe.
The EASA said additional tests would begin Sept. 1 in London as well.
Boeing must satisfy a long list of revisions required by regulators before the aircraft can return to commercial service.
Passenger Reluctance
And yet, United and other airlines are still hamstrung by consumers' reluctance to fly so long as they risk Covid-19 infection amid the coronavirus pandemic.
United is trying to pull out of its coronavirus nosedive. It plans to resume service on more than 25 international routes in September.
Even with its enhanced slate of planes, United's overall roster of flights will amount to just 37% of its total lineup of flights in September of last year. Still, the bigger future schedule will be 4% larger than the airline's capacity in August of this year.
The schedule expansion reflects an industrywide uptick in ticket demand.
United Airlines: Cuts Looming
Earlier this summer, the airline warned 2,250 of its 12,000-plus pilots of potential furloughs and layoffs coming in October.
United's newly announced cuts would occur between Oct. 1 and Nov. 30. They are much larger than the 1,900 cuts announced earlier this week by Delta Air Lines and the 1,600 by American Airlines.
In July, downsizing notices were sent to other United employees, including workers other than pilots. About 36,000 workers, or nearly half of United's U.S. work force, were warned.
Cost-cutting has slashed United's daily net cash burn to $40 million by late June. That was down from $100 million in April. The airline says it will trim that daily loss to $25 million in the current quarter.
In addition, United says it will stop using ExpressJet Airlines for short, regional flights by the end of this year. That move is expected to kill ExpressJet.
United and other airlines must keep front-line workers on the job until Sept. 30 under terms of the coronavirus relief package known as the Cares Act. United agreed to accept roughly $4.5 billion in Cares Act loans.
United Stock Stock: Turbulence Tosses Quarterly Results
What are the investment implications of this latest news? Investors want to know. But do you know what to check before you buy United Airlines stock?
United recently said it lost $1.6 billion in the second quarter due to plunging air travel because of the coronavirus pandemic. It notched a $1.05 billion profit in the same stanza last year. This year's second-quarter loss per share was $9.31, vs. $4.21 earnings per share last year.
Second-quarter revenue plunged to $1.4 billion. That was 87% below its $11.4 billion revenue in the same period last year.
Long-Term Prognosis For United Airlines
United Airlines stock broke out from a cup-with-handle base in July 2019. But that breakout fizzed as shares went sideways until January. Then United Airlines stock nosedived.
Odds are, United stock will rebound. But when? And will it resume its takeoff? Or will it be delayed at the departure gate?
After all, that's happened before — it's stalled three times previously, in fact, in little more than a year.
Will the fourth attempt be a charm, or will the stock go back into consolidation mode once again? The stock is down 63% this year and trading well below the 200-day moving average. Investors look for the stock to regain the 50-day average before jumping in.
United Airlines News: The 800-Pound Gorilla
The 800-pound gorilla in the room occupied by airline stocks is the grounding of Boeing's 737 Max jets.
United has kept its 737 Max jets grounded. United has been forced to cancel thousands of flights. And that was before the impact of the coronavirus pandemic on the entire airline industry.
737 Max aircraft were grounded in March 2019 due to concerns about two crashes, which appear to have similar causes. Boeing has been working on changes to faulty sensors and a flight control system, and is awaiting review by the FAA.
United Airlines has relatively few 737 Max jets, just 14.
The company does not fly any Max 8 jets, the specific type of plane that was involved in the fatal crashes.
The grounding hit some other U.S. airlines harder because they have more Max planes in their fleets.
Now, at long last, the Federal Aviation Administration (FAA) has published its list of required design changes for the 737 Max. The FAA is expected to issue an airworthiness directive, okaying Max flights again, in October.
After that, airlines are seen taking a month or two to modify and test their Max jets and train their pilots.
Fundamentals Of United Airlines Stock
Woes from the Boeing Max jet and the coronavirus have hit United's entire Transportation-Airline industry group.
United ranks No. 9 within its group of 22 stocks. The group itself now ranks 180 out of IBD's 197 industry groups, with No. 1 the top ranked, based on six-month stock price performance.
That's down from rank No. 98 in mid-September 2019, but up from No. 194 about two months ago.
United's individual ranking of 9 in that group is also well down from the No. 5 position that it occupied in mid-September 2019.
Its IBD Composite Rating has slipped to a dismal 7 from the 78 it held in mid-September.
That means it lags 93% of all stocks on a number of technical and fundamental factors, including price performance and earnings.
Generally, CAN SLIM investors consider only stocks with a score of 90 or higher on the 1-to-99 scale.
United Airlines Stock Technical Analysis: How Many Bases?
Where does all of that leave United? When investors are looking for top stocks to buy, it's ideal to see a stock shaping a proper chart pattern. IBD's long-term research shows that certain chart patterns are the launchpads that kick off virtually all major stock moves.
UAL stock formed a valid cup with handle base and broke out July 2, 2019. But then it failed to make progress and by August was losing ground. Some selling days have seen heavy volume.
This year, the stock has plunged on heavy volume. It needs to regain at least its 50-day moving average and form a base of support before investors should consider it.
Other Fundamental Analysis
United Airlines scores a 7 for its Earnings Per Share Rating. That's down from 39 in July and down from 92 in mid-September. The 7 Rating is awful but not surprising given coronavirus pandemic's impact on air travel. It means that UAL's earnings per share growth has outperformed just 7% of all publicly traded companies in earnings. Stocks with EPS Ratings of 80 or better have the best chance of success. Keep in mind, too, the company could rack up huge losses in 2020. The EPS Rating will likely plummet this year.
The stock has an IBD SMR Rating (Sales + Profit margins + Return on equity) of D. That isn't very bright. It shows that United is near the bottom of all publicly traded stocks when it comes to the composite profitability measurement. This, too, will likely fall once the company reports results this year.
United had a B SMR Rating in September.
Technical Ratings Are Weak
On the technical side, United Airlines stock's Relative Strength Rating of 15 is dreadful. It is well shy of the 80 minimum you'd like to see. It was in the 80s a year ago.
The best stocks tend to have an RS of 80 or better as they start a new climb. IBD's proprietary RS Rating ranges from 1 (worst) to 99 (best), measuring a stock's price performance over the last 12 months against all other stocks.
Still, the stock has an IBD Accumulation/Distribution Rating (A/D) of A-, up from C+ in June. That positive rating indicates decent buying by institutional investors such as mutual funds, likely fueled by bargain hunting.
Big backing by funds helps stocks break out.
As of June 30, the stock was held by 1,219 mutual funds, according to data from MarketSmith. That was down from 1,597 as of Dec. 31. The number of shares held by funds slipped to 129.4 million, down from 152.9 million.
Bottom Line: Is United Airlines Stock A Buy?
What are you left with? On the positive side, the ailments causing United's key ills — travel contraction caused by the pandemic and the grounding of Max 737 jets — will be cured at some point.
But how soon?
Further, growth stock investors generally should focus on the best stocks in the stock market's leading industry groups. The airline industry does not meet that standard, and UAL stock ranks 9th in the group, according to the IBD Stock Checkup.
Until Relative Strength improves more, you might be better off giving up your seat on this airline to someone else. This is not a buy.
The reduced furlough would be possible due to 7,400 employees taking buyouts or early retirement. And as many as another 20,000 reduced their work schedules or took unpaid leaves.
A United executive told reporters that the Chicago-based airline does not expect air travel volume to return to normal until a vaccine for Covid-19, the disease caused by coronavirus, is widely available.
In the closing days of August, the airline ended its hated $200 fee for changing a ticket for travel within the U.S. That move to lure skittish passengers back aboard its planes beat rival airlines.
Volume 0%
United Airlines Stock Rose
United Airlines Stock rose four of the past five trading days.
A day later United dropped its ticket change fee, American Airlines (AAL) and Delta Airlines (DAL) followed suit, dropping their $200 change fees on domestic flights. American's move covers flights to Canada, Mexico and the Caribbean as well. Alaska Airlines waived its $125 change fee on Tuesday. Southwest (LUV) does not charge change fees.
United's change fee had applied to standard and premium economy tickets for U.S. travel. United waived its change fee through Dec. 31 on the lowest fares, called "basic economy."
The Chicago-based airline also said, starting Jan. 1, 2021, passengers will be allowed to fly standby at no cost on another flight departing the same day as their booked flight no matter the type of ticket or class of service.
United waived some other fees as well.
United also sees good news regarding the Boeing 737 Max aircraft. The European Union Aviation Safety Agency (EASA) said it would begin certification tests of the revamped Max aircraft, starting Sept. 7. The tests will take place in Vancouver, Canada.
The 737 Max's sensors and flight control system are being reworked in the wake of two high-profile crashes. U.S. regulators began similar tests two months ago.
United Airlines Stock Rises On Test Flight News
The EASA said it was cooperating with Boeing and the U.S. Federal Aviation Administration (FAA) to enable the 737 Max to return to service quickly but only once it is deemed safe.
The EASA said additional tests would begin Sept. 1 in London as well.
Boeing must satisfy a long list of revisions required by regulators before the aircraft can return to commercial service.
Passenger Reluctance
And yet, United and other airlines are still hamstrung by consumers' reluctance to fly so long as they risk Covid-19 infection amid the coronavirus pandemic.
United is trying to pull out of its coronavirus nosedive. It plans to resume service on more than 25 international routes in September.
Even with its enhanced slate of planes, United's overall roster of flights will amount to just 37% of its total lineup of flights in September of last year. Still, the bigger future schedule will be 4% larger than the airline's capacity in August of this year.
The schedule expansion reflects an industrywide uptick in ticket demand.
United Airlines: Cuts Looming
Earlier this summer, the airline warned 2,250 of its 12,000-plus pilots of potential furloughs and layoffs coming in October.
United's newly announced cuts would occur between Oct. 1 and Nov. 30. They are much larger than the 1,900 cuts announced earlier this week by Delta Air Lines and the 1,600 by American Airlines.
In July, downsizing notices were sent to other United employees, including workers other than pilots. About 36,000 workers, or nearly half of United's U.S. work force, were warned.
Cost-cutting has slashed United's daily net cash burn to $40 million by late June. That was down from $100 million in April. The airline says it will trim that daily loss to $25 million in the current quarter.
In addition, United says it will stop using ExpressJet Airlines for short, regional flights by the end of this year. That move is expected to kill ExpressJet.
United and other airlines must keep front-line workers on the job until Sept. 30 under terms of the coronavirus relief package known as the Cares Act. United agreed to accept roughly $4.5 billion in Cares Act loans.
United Stock Stock: Turbulence Tosses Quarterly Results
What are the investment implications of this latest news? Investors want to know. But do you know what to check before you buy United Airlines stock?
United recently said it lost $1.6 billion in the second quarter due to plunging air travel because of the coronavirus pandemic. It notched a $1.05 billion profit in the same stanza last year. This year's second-quarter loss per share was $9.31, vs. $4.21 earnings per share last year.
Second-quarter revenue plunged to $1.4 billion. That was 87% below its $11.4 billion revenue in the same period last year.
Long-Term Prognosis For United Airlines
United Airlines stock broke out from a cup-with-handle base in July 2019. But that breakout fizzed as shares went sideways until January. Then United Airlines stock nosedived.
Odds are, United stock will rebound. But when? And will it resume its takeoff? Or will it be delayed at the departure gate?
After all, that's happened before — it's stalled three times previously, in fact, in little more than a year.
Will the fourth attempt be a charm, or will the stock go back into consolidation mode once again? The stock is down 63% this year and trading well below the 200-day moving average. Investors look for the stock to regain the 50-day average before jumping in.
United Airlines News: The 800-Pound Gorilla
The 800-pound gorilla in the room occupied by airline stocks is the grounding of Boeing's 737 Max jets.
United has kept its 737 Max jets grounded. United has been forced to cancel thousands of flights. And that was before the impact of the coronavirus pandemic on the entire airline industry.
737 Max aircraft were grounded in March 2019 due to concerns about two crashes, which appear to have similar causes. Boeing has been working on changes to faulty sensors and a flight control system, and is awaiting review by the FAA.
United Airlines has relatively few 737 Max jets, just 14.
The company does not fly any Max 8 jets, the specific type of plane that was involved in the fatal crashes.
The grounding hit some other U.S. airlines harder because they have more Max planes in their fleets.
Now, at long last, the Federal Aviation Administration (FAA) has published its list of required design changes for the 737 Max. The FAA is expected to issue an airworthiness directive, okaying Max flights again, in October.
After that, airlines are seen taking a month or two to modify and test their Max jets and train their pilots.
Fundamentals Of United Airlines Stock
Woes from the Boeing Max jet and the coronavirus have hit United's entire Transportation-Airline industry group.
United ranks No. 9 within its group of 22 stocks. The group itself now ranks 180 out of IBD's 197 industry groups, with No. 1 the top ranked, based on six-month stock price performance.
That's down from rank No. 98 in mid-September 2019, but up from No. 194 about two months ago.
United's individual ranking of 9 in that group is also well down from the No. 5 position that it occupied in mid-September 2019.
Its IBD Composite Rating has slipped to a dismal 7 from the 78 it held in mid-September.
That means it lags 93% of all stocks on a number of technical and fundamental factors, including price performance and earnings.
Generally, CAN SLIM investors consider only stocks with a score of 90 or higher on the 1-to-99 scale.
United Airlines Stock Technical Analysis: How Many Bases?
Where does all of that leave United? When investors are looking for top stocks to buy, it's ideal to see a stock shaping a proper chart pattern. IBD's long-term research shows that certain chart patterns are the launchpads that kick off virtually all major stock moves.
UAL stock formed a valid cup with handle base and broke out July 2, 2019. But then it failed to make progress and by August was losing ground. Some selling days have seen heavy volume.
This year, the stock has plunged on heavy volume. It needs to regain at least its 50-day moving average and form a base of support before investors should consider it.
Other Fundamental Analysis
United Airlines scores a 7 for its Earnings Per Share Rating. That's down from 39 in July and down from 92 in mid-September. The 7 Rating is awful but not surprising given coronavirus pandemic's impact on air travel. It means that UAL's earnings per share growth has outperformed just 7% of all publicly traded companies in earnings. Stocks with EPS Ratings of 80 or better have the best chance of success. Keep in mind, too, the company could rack up huge losses in 2020. The EPS Rating will likely plummet this year.
The stock has an IBD SMR Rating (Sales + Profit margins + Return on equity) of D. That isn't very bright. It shows that United is near the bottom of all publicly traded stocks when it comes to the composite profitability measurement. This, too, will likely fall once the company reports results this year.
United had a B SMR Rating in September.
Technical Ratings Are Weak
On the technical side, United Airlines stock's Relative Strength Rating of 15 is dreadful. It is well shy of the 80 minimum you'd like to see. It was in the 80s a year ago.
The best stocks tend to have an RS of 80 or better as they start a new climb. IBD's proprietary RS Rating ranges from 1 (worst) to 99 (best), measuring a stock's price performance over the last 12 months against all other stocks.
Still, the stock has an IBD Accumulation/Distribution Rating (A/D) of A-, up from C+ in June. That positive rating indicates decent buying by institutional investors such as mutual funds, likely fueled by bargain hunting.
Big backing by funds helps stocks break out.
As of June 30, the stock was held by 1,219 mutual funds, according to data from MarketSmith. That was down from 1,597 as of Dec. 31. The number of shares held by funds slipped to 129.4 million, down from 152.9 million.
Bottom Line: Is United Airlines Stock A Buy?
What are you left with? On the positive side, the ailments causing United's key ills — travel contraction caused by the pandemic and the grounding of Max 737 jets — will be cured at some point.
But how soon?
Further, growth stock investors generally should focus on the best stocks in the stock market's leading industry groups. The airline industry does not meet that standard, and UAL stock ranks 9th in the group, according to the IBD Stock Checkup.
Until Relative Strength improves more, you might be better off giving up your seat on this airline to someone else. This is not a buy.
Reprinted from yahoofinance, the copyright all reserved by the original author.
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