Is The Market Pricing United Airlines Fairly?

by Trefis Team
-19.03%
Downside
89.94
Market
72.82
Trefis
UAL
United Continental Holdings
Rate   |   votes   |   Share

United Continental (NYSE:UAL) has had a rather eventful 2017. The first half of the year recorded better than expected results, with revenues and earnings consistently beating the consensus estimates, while the second half witnessed a slowdown. In this respect, the company’s stock price ended up lower than at the beginning of the year. Further, in the most recent earnings, the company announced its plans to increase capacity significantly, which essentially would lead to a fall in ticket prices, sending investors into a selling frenzy. At present, the stock price, as of 15 March, sits at ~$70. As per our calculations, the market has undervalued the stock by almost 14%.

We have created an interactive dashboard analysis to estimate United’s valuation based on its expected revenues for FY 2018. Click on the link to modify the figures to arrive at your own price estimate.

Our estimate of $80 is based on a few expectations:

  • United will deliver $38.7 billion in revenues in FY 2018.
  • The P/S multiple in FY 2018 will be around 0.60, which is slightly higher than 0.54 in FY 2017.
  • The company’s average share count in FY 2018 will be around 290 million.

United’s revenue comes from four main sources: passenger-mainline revenue, passenger-regional revenue, cargo revenue, and other operating revenue.

In order to estimate the revenues for each of the divisions, we broke down the historical data to their core revenue drivers (except in the case of cargo and other operating revenues). This enabled us to forecast each of the drivers, thereby making our estimates as accurate as possible.

Passenger-Mainline:

Passenger-Regional:

Cargo:

 

 

 

 

 

Other Operating Revenue:

 

 

 

 

 

 

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards and create your own.

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!