With shares of United Continental Holdings, Inc. (NYSE:UAL) trading around $24.19, is UAL an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
United’s debt-to-equity ratio of 6.63 reflects a tremendous amount of debt that looks more normal when compared against its major competitors. It’s important to understand this in relation to the company’s long-term debt and total cash on hand, which for United Continental is $12.2 billion in debt and $6.76 billion in cash.
This compares to competitors such as US Airways Group, Inc (NYSE:LCC), which has a debt-to-equity ratio of 6.02, wit $4.57 billion in long-term debt and $2.44 billion in cash. Delta Air Lines Inc. (NYSE:DAL) clocks in at a debt-to-equity ratio of 7.42, with $12.66 billion in long-term debt and $3.63 billion in cash.
Airlines as an industry have been working to reduce their total debt load in the wake of a bankruptcy epidemic. For its part, United filed for Chapter 11 in December of 2002.
A = A-Level Management Runs the Company
There’s no point in having a well-oiled machine if nobody knows how to use it.
On December 14, United named president and CEO Jeff Smisek to the position of chairman of the board, replacing Glenn Tilton. Tilton served as chairman of UAL Corporation until its merger with Continental Airlines in October, 2010, and will continue to serve as a regular board member.
Smisek also came over from Continental with the merger. He began his work there as senior vice president and general counsel to the team that helped turn the airline around after it filed for Chapter 11 in 1983. Smisek joined in 1985, a year before the Airline emerged from bankruptcy, and in 2004 was named president and was elected to the company’s board.
Also on December 14, Jim Compton became vice chairman and chief revenue office, and Jeff Foland became EVP of marketing, technology, and strategy.
“Now is the time to begin the next phase for United, as we continue on the path to becoming the world’s leading airline,” Smisek said in a statement. “This structure aligns our senior management team to most effectively and efficiently meet the challenges and opportunities of this next phase.”