United Airlines Holdings, Inc. (NASDAQ:UAL) Finds Strength in Soaring Air-Travel Demand and Optimistic Prospects, Despite Lingering Liquidity Concerns
Positive Factors for UAL
United Airlines’ financials have taken flight, courtesy of the surging demand for air travel and a brighter outlook. In the second quarter of 2023, the company reported a remarkable 17.1% year-over-year surge in its revenues. This remarkable growth was primarily fueled by a substantial 20.1% uptick in passenger revenues, which accounted for a substantial 91.7% of its overall top-line performance.
Bolstered by this robust air-travel demand, United Airlines is poised for continued growth, projecting a 10-13% year-over-year revenue increase for the upcoming September quarter. Furthermore, in the third quarter of 2023, the airline anticipates a substantial 16% improvement in capacity compared to the figures reported in the same period last year.
In line with this favorable air-travel landscape, United Airlines has set its sights on an impressive earnings target for the third quarter, ranging between $3.85 and $4.35 per share. The management has also raised its earnings per share (EPS) forecast for the full year 2023, now expecting it to be in the range of $11 to $12, up from the previous projection of $10 to $12.
In a strategic move aimed at modernizing its fleet, United Airlines inked a significant deal with Boeing in December 2022, securing the largest-ever order of 787 Dreamliners. The airline is set to acquire 100 Boeing 787 Dreamliners, with options to purchase an additional 100. These state-of-the-art widebody planes are scheduled for delivery between 2024 and 2032, promising a remarkable 25% improvement in fuel efficiency when compared to the aging Boeing 767 widebodies and certain 777s they will replace.
Potential Concerns
Despite these promising developments, there remains a cause for concern as United Airlines grapples with a declining current ratio, a key measure of liquidity. The company exited the second quarter of 2023 with a current ratio of 0.91, down from the reading of 1 in the fourth quarter of 2022. A dwindling current ratio typically suggests a diminishing ability to generate cash, warranting attention from investors and analysts alike.
Featured Image: Unsplash @ Jason Leung
