When United Continental (UAL) pledged to cut costs on its investors day, it got a big boost that helped it outpace competitors like Delta Air Lines (DAL), US Airways (LCC) and Alaska Airlines (ALK). Can the good times continue?Associated Press
Not necessarily, says Imperial Capital’s Bob McAdoo and Scott Buck. While they raised United Continental’s target price to $42 from $36, they have reservations:
Management had previously acknowledged the airline's underperformance to peers and used its investor day on 11/19/13, which was held in New York, to outline a new cost reduction plan. The plan relies on a combination of improved fuel efficiency, productivity improvements, streamlined maintenance, and modest changes to the current international route structure. Meeting these objectives would move financial results towards peer levels. However, given the plan's high level of economic sensitivity and extended timetable, progress towards meeting these objectives may be hard to track. While we expect UAL shares to continue to benefit from sector demand, and will likely outperform the market, we would prefer to own shares of legacy peers Alaska Airlines, Delta, and US Airways.
Shares of United Continental have dropped 0.4% to $37.14, while Delta has gained 0.9% to $27.97, US Airways has fallen 0.5% to $23.93 and Alaska Airlines has risen 0.6% to $76.03.