Breaking: United Airlines Flights Grounded
UAL is trading 5% lower
- United Airlines grounded all flights nationwide on Sept. 5 after a software update created technology issues for the airline.
- Normal operations resumed around 12:45 p.m. Central Time, but the stock was already down around 5% from the previous close.
- The airline's stock dropped below $48, a level it hasn't seen since early June 2023.
United Airlines (UAL) grounded its flights on Tuesday after a software update created a system-wide technology issue for the popular airline.
The stock was down as much as 5% from the previous close when the news hit, even though flights resumed the same day. Word travels fast in the stock market!
The stock is now trading just under $49 per share, which is where it was trading in early June just before it hit a 2023 high point of $58.23 on July 21.
The stock is expected to report earnings in October, and it should be an interesting release because United Airlines stock beat earnings-per-share (EPS) expectations by double digit percentages four quarters in a row, and revenue expectations three out of the last four quarters. The airline sector will likely face some challenges with the surging price of crude oil (/CL)
Airline fuel costs on the rise with crude oil?
Much to the chagrin of the airline sector, crude oil is blasting to 2023 highs at the same time United Airlines experienced its tech outage.
Saudi Arabia and Russia are extending their production cuts, which adds upside pressure to the price of oil with supply limitations and an expectation that demand may only increase with the holidays looming.
Fuel costs are a massive part of the expenses all airlines face, and rising oil prices are never a welcome sight for United, or any other airline for that matter. If oil prices remain elevated, the airline sector may have a challenging time presenting strong earnings numbers next quarter, and this is especially true for United, a company that has posted double digit EPS beats four quarters in a row.
United Airlines stock forecast
United Airlines' stock is expected move, based on current implied volatility, is +-$6.83 through the Dec. 15 monthly options cycle
We can always count on the options market to give us a one standard deviation expected price fluctuation, and currently it sits at +-$6.83 through the December monthly options cycle.
This figure can change based on current and future news and events, or on substantial earnings move, but it currently falls in line with what we've seen over the past few months. The stock has had about a $10 total price range since early June 2023, which is inside the $13 and change expected range that implied volatility is currently projecting through the rest of the year.
Be sure to check back in for a United Airlines (UAL) earnings preview in early October 2023!
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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