UBS: United is going to go a lot higher from here

Frank Chaparro

Apr 12, 2017, 21:26 IST

Getty Images/Scott Olson

United Airlines is still reeling from a public relations disaster involving a passenger who was forcibly removed from one of its airplanes.

But in a note by UBS analysts Darryl Genovesi and David E. Strauss sent out to clients on Wednesday, the firm has some good news to help it get through the the storm.

In the note, which did not touch on Sunday's incident, Genovesi and Strauss upgraded their outlook on the for United, saying they expect first quarter earnings of about $0.40 per share, compared to Wall Street's estimate of $0.34.

The bank's expectation for a higher EPS is based on lower operating costs and tax rate for the firm.

"EPS upside relative to our model is on lower operating costs (~$0.12) and lower tax rate (~$0.02), the duo wrote." "UAL sees Q1 non-fuel unit cost (CASM ex fuel) up ~5%, in line with midpoint of prior guidance (4.5-5.5%), and ~50 bps better than we had modelled, while fuel costs are seen lower now vs. prior guide, including lower fuel burn per ASM and lower fuel cost per gallon."

Shares of the airline were up 0.8% on Wednesday morning, trading at $71.50. That's more than 4% higher than Tuesday's low of $68.36.

But UBS predicts the stock will go even higher. They have a price target of $90 per share, up another 28.5% from here.