United Continental Holdings Inc. (NYSE:UAL)
On October 1, 2010, UAL Corp. merged with Continental Airlines in an all-stock merger in which each Continental share was converted into 1.05 UAL shares. The combined company operates approximately 5,800 flights per day to more than 375 U.S. domestic and international destinations.
After acquiring Continental, UAL's financial position weakened (highly leveraged financial profile). Moreover, its financial performance is expected to weaken as traffic, or revenue passenger miles (RPM), has been declining. In August 2011, RPM decreased 2.7 percent versus pro forma August 2010 results on a consolidated capacity or available seat miles decrease of 1.6 percent.
UAL's current ratio of 0.97 is an indication of weak working capital management. Long-term debt for UAL is$12.1 billion and net current assets are negative $371.0 million, an indication of a weakening financial position.
Yesterday, the stock lost $0.94, or 4.53 percent, to close at $19.83. This compares with a 52-week range of $15.92 to $29.75. By the end of Q4, I expect the stock to test $17. Buying at current levels could lead to a profit-loss ratio of 1 to 1.3.
US Airways Group Inc. (NYSE:LCC)
LCC is the fifth largest airline operating in the U.S. as measured by domestic revenue passenger miles and available seat miles. The carrier operated a main-line fleet of 339 planes as of December 31, 2010, down from a total of 419 mainline planes operated by both airlines at the beginning of 2005. In addition, passengers are fed into the main-line system by a regional fleet consisting of 236 regional jets and 60 turboprops.
LCC's current ratio of 0.9, is an indication of weak working capital management. Long-term debt for LCC is $3.9 billion and net current assets are negative $21.0 million, an indication of a weakening financial position.
Yesterday, the stock lost $0.12, or 2.01 percent, to close at $5.85. This compares with a 52-week range of $4.68 to $12.26. By the end of Q4, I expect the stock to test $4.50. Buying at current levels could lead to a profit-loss ratio of 1 to 1.4.
FedEx Corp. (NYSE:FDX)
FedEx Corp. provides global time-definite air express services for packages, documents and freight in more than 220 countries, and ground-based delivery of small packages in North America.