Commenting on earnings and revenue of U.S. Airways (NYSE:LCC) and United Continental (NYSE:UAL), Barclays said they see them continuing to grow alongside fuel.
Barclays says, "Yesterday we got solid earnings and strong revenue data points from U.S. Airways (NYSE: LCC) and United Continental (NYSE: UAL) suggesting the revenue environment is accelerating alongside fuel. Capacity outlooks were unchanged, but the market was prepared for that outcome after last week. Cost guidance from both was roughly in line, but revenue data points were encouraging. LCC's revenue guidance was very much in line with our expectations, but UAL's January RASM guidance was by far the biggest upside surprise thus far during earnings season. Our estimates for LCC rise slightly, but our UAL forecast rises substantially on much better than expected revenue trends in 1Q. Given the estimate changes we expect from others for UAL, we expect the shares to rise further relative to the sector.
"Adds up to a powerful outlook; stocks should perform better. Fundamentally, we believe earnings season provided support for our robust earnings and cash flow outlook across the sector in 2011. Rising fuel is a risk, but investors should be mindful of the historical correlation between unit revenue and fuel. Demand acceleration along with rapid changes in the fare structure in recent weeks should allow for significant earnings gains despite rising fuel. As the market's comfort with the sector grows, we believe the shares will trade much better."
United Continental Holdings (UAL) closed Thursday at $26.96, gaining $1.17, or 4.54 percent. US Airways ended the trading session at $11.05, up $0.25, or 2.31 percent.
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