On Wednesday, shares of legacy airliner United Continental Holdings Inc. (NYSE:UAL) are falling, down around 6% in morning trading after Credit Suisse (SIX:CSGN) issued a ratings downgrade to ‘Neutral’ from ‘Outperform’ in a research note.
The firm also slashed its price target on shares of the airliner to $42 from $64.
Credit Suisse analyst Julie Yates argued that free cash flow will begin to disappear in 2017 for the Chicago-based company, as aircraft capital expenditures rise. "Fading free cash generation slows further delivering progress and stifles the prospect that buybacks continue anywhere near the 2016 level," Yates added.
In terms of management, Yates believes that they are headed down the right path, addressing sources of financial underperformance as well as outlining cost and revenue strategies to help bolster growth by 2018.
Despite this, the firm is concerned that investors will become impatient with the pace of change, and will grow “skeptical” about United Continental’s ability to deliver improved margins.
Currently, United Continental holds a #4 (Sell) on the Zacks Rank.
UNITED CONT HLD (UAL): Free Stock Analysis Report
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