Financial Analysis

STO C K C O M PA RISO N
FIN 607
OUR TEAM Hendrino
Usnal

Garrett
Hawes

Alex
Chikovani 

Yoony Lee
The investment by government to the development of aircraft since World War has contributed to improve the design and
construction of airplanes.
Following the World War II, the first commercial airplane routes were set up in Europe.

The Airline industry has altered the way in which people live and conduct business by shortening travel time and altering
our concept of distance, making it possible for us to visit and conduct business in places once considered remote.

Airline Industry Category by the U.S Department of Transportation:

International, National, Regional, Cargo.

Factors that are significant to the airline industry are, airport capacity, route structures, technology, costs to lease or buy
the physical aircraft as well as weather, fuel cost, and labor.
• Growing demand • Huge capital outlays
• Improving safety records • Large disparate workforce
• Highly trained staff • Complex schedules
• Market segmentation • High spoilage rate

STRENGTHS WEAKNESSES

OPPERTUNITIES THREATS

• Continuous expansion opportunities • Global economic

• Technology advances can result in cost downturn
savings • Price of fuel
• Threats from international
terrorism
• Government intervention
Key Ratios/Terms
• Available Seat Mile = (total # of seats available for transporting
passengers) * (# of mile flown during period)
•
EPS(earning per share): (Net income-Preferred Dividends)/End of
period common shares outstanding
•
Term Definitions
P/E: Market value per share/Earnings per share
•
PEG(price/earnings-to-growth): (Price/EPS)/EPS growth
 UAL

$89.24*
4.07[4.78%]

BUY
Founded in 1934 Chicago based aviation giant United Continental Holdings, Inc. has become a
household name in commercial aviation. The company was formerly called UAL Corporation and now
United Continental Holdings, inc., since October 2010. Through its subsidiaries, the company offers air
travel services in North and Latin America, Europe, Asia, and the Middle East. United's main business
includes transporting people and cargo via its regional operations and routes. United offers additional
services in the fuel and logistics sectors. Of the three airlines discussed here, United is the most
established firm with the most traditional business model.

* Wednesday, April 17, 2019

 United
Earnings Growth - UAL

Earnings Growth
25.00%
21.73%

18.47%
20.00%
UNITED

EPS estimate % change current year = 22%

15.00%
Past 3 year EPS growth rate = 0%

2019 looks to be a significant improvement in the company’s EPS growth 8.69%

10.00%
performance relative to recent previous years

Company is currently engaged in a multi-year growth plan, deploying 5.00%

flights to and from smaller U.S. cities and their mid continent hubs
Chicago,
0.00%
Denver, and Houston
2019 Forecast 2020 Forecast Weighted Next 12 Months*
* Weighted average including 3 remaining quarters in 2019 and the first quarter of 2020.

Source: Zacks Investment via Nasdaq.com

 Growth Estimates UAL SAVE LUV
Current Qtr. 88.00% 90.90% -18.70%
Next Qtr. 25.10% 79.30% 13.50%
Current Year 21.90% 40.50% 10.10%
Next Year 8.90% 8.70% 13.30%
Next 5 Years
(per annum) 13.40% 20.77% 12.04%
Past 5 Years
(per annum) 0.86% 5.67% 21.71%

* Source: Yahoo Finance

Revenue Estimates UAL SAVE LUV

Current Quarter 6.30% 21.70% 3.90%
Next Quarter 21.50% 6.30% 21.70%
Next Year 5.80% 14.80% 7.00%
* Source: Yahoo Finance
 Fiscal Consensus EPS* High EPS* Low EPS* Number of
Quarter Forecast Forecast Forecast Estimates
Q2 2019 $4.08 $4.67 $3.50 19
Q3 2019 $3.60 $4.21 $3.30 19
Q4 2019 $2.46 $2.87 $1.89 19
Q1 2020 $0.73 $1.16 $0.20 11
Total $10.87 $12.91 $8.89
Source: Zacks Investment via Nasdaq.com
 0.45

UNITED
P/E*
8.21 EPS *

$10.87
* Forecasted P/E
Source: Zacks Investment via Nasdaq.com
 Historical Data
Revenue per Year SAVE
$3,500
Year Revenue
(Thousands) $3,000

2015 $2,141,463

Revenue (Millions of Dollars)

$2,500
UNITED

2016 $2,320,021
2017 $2,643,552 $2,000
2018 $3,323,034
$1,500

$1,000

55% Revenue Growth (15-18)

$500
26% Revenue Growth (17-18)
$0
2015 2016 2017 2018
Year

Source: SAVE 10K Financials

 Relative Timing

United’s current mid/longer-

term price trend is trending
towards up

150 day and 200 day moving

averages are sloping flat to up

The price is currently trading

above the 50-day, 150-day, and
200-day moving averages
*VectorVest.com.
 Trade Volume

Trading Volume ↑ 118.61% vs 50

day moving average.

A pick up in recent volume as the

stock price has been moving up
indicates increasing demand and
interest for the stock. Note the
higher volume when the stock
gapped up after an announcement
on 4/17/19 - this is a positive
factor when a stock gaps up in
price on increased volume.
*VectorVest.com.
 Your image here

Ratios
 LUV

$52.76*
-0.02[-0.04%]

SELL
Dallas based Southwest Airlines Co. has only been around since 1967 and has focused mainly on growth
areas in the industry. It offers scheduled passenger air transportation services both in the US domestic and
near-international routes. As of December 31st, 2018 Southwest boasted a fleet of 750 Boeing 737
aircrafts. Southwest services 99 routes covering 40 states and 10 international destinations. Southwest has
been able to achieve this growth by offering budget sensitive alternatives to traditional airlines while still
maintaining a level of consistency and quality that many of its competitors have been unable to match.
One might classify Southwest as budget plus when comparing them to other travel options.

* Wednesday, April 17, 2019

 Write Something Caption Here
Earnings Growth – LUV

Earnings Growth
12.40%

12.14%
SOUTHWEST

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12.00%
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Series 01
11.80% 12.34%

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11.52%
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11.40%

Series 02 11.20%

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nonpulvinarvpulvinarscelerisquea. Q 2019 Forecast 2020 Forecast Weighted Next 12 Months*

* Weighted average including 3 remaining quarters in 2019 and the first quarter of 2020.

Source: Zacks Investment via Nasdaq.com

 Growth Estimates UAL SAVE LUV
Current Qtr. 88.00% 90.90% -18.70%
Next Qtr. 25.10% 79.30% 13.50%
Current Year 21.90% 40.50% 10.10%
Next Year 8.90% 8.70% 13.30%
Next 5 Years
(per annum) 13.40% 20.77% 12.04%
Past 5 Years
(per annum) 0.86% 5.67% 21.71%

* Source: Yahoo Finance

Revenue Estimates UAL SAVE LUV

Current Quarter 6.30% 21.70% 3.90%
Next Quarter 21.50% 6.30% 21.70%
Next Year 5.80% 14.80% 7.00%
* Source: Yahoo Finance
 Fiscal Consensus EPS* High EPS* Low EPS* Number of
Quarter Forecast Forecast Forecast Estimates
Q2 2019 $1.47 $1.62 $1.30 10
Q3 2019 $1.34 $1.55 $1.19 10
Q4 2019 $1.33 $1.54 $1.11 10
Q1 2020 $0.86 $0.94 $0.76 3
Total $5.00 $5.65 $4.35
Source: Zacks Investment via Nasdaq.com
 0.87

SOUTHWEST
P/E*
10.55 EPS *

$5.00
* Forecasted P/E
Source: Zacks Investment via Nasdaq.com
 Historical Data
Revenue per Year SAVE
$3,500
Year Revenue
(Thousands) $3,000
SOUTHWEST

2015 $2,141,463

Revenue (Millions of Dollars)

$2,500
2016 $2,320,021
2017 $2,643,552 $2,000
2018 $3,323,034
$1,500

$1,000

55% Revenue Growth (15-18)

$500
26% Revenue Growth (17-18)
$0
2015 2016 2017 2018
Year

Source: SAVE 10K Financials

 Relative Timing

Southwest’s current mid/longer-term

price trend is flat to a little bit down.

The 150-day and 200-day moving

averages are sloping a little down to
flat.

The 50-day moving average is currently

below both the 150-day and 200-day
moving averages.

The price is currently trading below the

50-day, 150-day, and 200-day moving
*VectorVest.com.
averages
 Trade Volume

Trading Volume ↓ 53% vs 50

day moving average.

Overall lower trading volume

indicates weaker demand for
the stock. Higher volume on
declines and low volume on
rallies indicates weaker
demand/interest for the stock.

*VectorVest.com.
 Your image here

Market performance last year vs industry

 Your image here

Info Graphic for ratios

 8.6 Trump Administration
Proposed Wall Funding
Billion 2020 Budget.

Effects of 2019 60
shutdown on
Southwest. Million

Number of things that

have substantively
0 changed since the last

2020 shutdown.

Due to a number of factors predominantly the nature of Southwest’s routes and the fact that they are the vendor of choice for many government agencies southwest was hit much harder
than
60 M
$ other airlines by the 2019 shutdown. Given that the administration has asked for much more than it did in 2019 for wall funding and that both sides will be motivated to bring home
a win to the base leading into the election there is a very real possibility that we will see another prolonged shutdown within the next 12 months.
 Boeing 737

SOUTHWEST
*

737-700 are scheduled for retirement and Southwest’s chairman has announced that
they have no plans to change orders for hundreds of orders for 736-MAX **

* planespotters.net
** source for CEO statement
“Claims of Shoddy Production Draw Scrutiny to a Second Boeing Jet”
-NYT April 20th 2019
 SAVE

$55.56*
0.58[1.05%]

HOLD
While technically in operation since 1965 Florida based Spirit Airlines, Inc. (formerly Clippert
Trucking Company) only pivoted to commercial air travel in 1992. This airline offers low-fare air
travel services with about 600 daily operations covering 72 routes in the US, Latin America, and the
Caribbean. It owns a total of 128 airbuses of single-aisle aircraft including 60 A320ceos, 31 A319s, 30
A321ceos, and 7 A320neos. Among its business activities are tickets sales through airport ticket
counters, call centers as well as online through spirit.com. For easy reach and customer convenience, it
uses third parties ticketing services including electronic global distribution systems and traditional
travel agents to sell tickets. Spirit focuses on providing ultra-low fare travel with very few included
services.

* Wednesday, April 17, 2019

 Earnings Growth Earnings Growth - SAVE

45.00% 41.23%

40.00%
Over the next five years, Spirit earning is expecting to grow at an average
32.80%
annual rate of 21.45%. 35.00%
SPIRIT

30.00%
This year, analysts are forecasting earnings increase of 41.23% over last
year. 25.00%

20.00%
Analysts expect earnings growth next year of 7.52% over this year's
forecasted earnings. 15.00%
7.52%
10.00%

5.00%

0.00%

2019 Forecast 2020 Forecast Weighted Next 12 Months*

* Weighted average including 3 remaining quarters in 2019 and the first quarter of 2020.

Source: Zacks Investment via Nasdaq.com

 Growth Estimates UAL SAVE LUV
Current Qtr. 88.00% 90.90% -18.70%
Next Qtr. 25.10% 79.30% 13.50%
Current Year 21.90% 40.50% 10.10%
Next Year 8.90% 8.70% 13.30%
Next 5 Years
(per annum) 13.40% 20.77% 12.04%
Past 5 Years
(per annum) 0.86% 5.67% 21.71%

* Source: Yahoo Finance

Revenue Estimates UAL SAVE LUV

Current Quarter 6.30% 21.70% 3.90%
Next Quarter 21.50% 6.30% 21.70%
Next Year 5.80% 14.80% 7.00%
* Source: Yahoo Finance
 Fiscal Consensus EPS* High EPS* Low EPS* Number of
Quarter Forecast Forecast Forecast Estimates
Q2 2019 $1.95 $2.09 $1.65 6
Q3 2019 $1.92 $2.19 $1.78 6
Q4 2019 $1.47 $1.99 $1.15 6
Q1 2020 $0.74 $0.74 $0.74 1
Total $6.08 $7.01 $5.32
Source: Zacks Investment via Nasdaq.com
 0.49

SPIRIT
P/E*
9.14 EPS *

$6.08
* Forecasted P/E
Source: Zacks Investment via Nasdaq.com
 Historical Data
Revenue per Year SAVE
$3,500
Year Revenue
(Thousands) $3,000

2015 $2,141,463

Revenue (Millions of Dollars)

$2,500
SPIRIT

2016 $2,320,021
2017 $2,643,552 $2,000
2018 $3,323,034
$1,500

$1,000

55% Revenue Growth (15-18)

$500
26% Revenue Growth (17-18)
$0
2015 2016 2017 2018
Year

Source: SAVE 10K Financials

 Relative Timing

“RT analyzes a stock's price

trend. LUV has a Relative Timing
of 0.96, which is fair on a scale of
0.00 to 2.00. RT is computed
from an analysis of the direction,
magnitude, and dynamics of a
stock's price movements day-
over-day, week-over-week,
quarter-over quarter and year-
over-year. If a trend dissipates,
RT will gravitate toward 1.00.”
- VectorVest *VectorVest.com.
 Trade Volume

Trading Volume ↓ 40.56% vs 50

day moving average.

Overall higher trading volume

indicates higher demand for the
stock. Lower volume on declines
and higher volume on rallies
indicates stronger
demand/interest for the stock.

*VectorVest.com.
 Your image here

Relative value
 Your image here

Timing and GPE

Consumer 2019 Airline Quality Rating report Spirit has
moved up 3 spots from the bottom. The result of
Sentiment a campaign to focus on reliability and service.
Thank You