United Airlines (UAL) is up more than 5% today following the release of the company’s first-quarter earnings announcement. The airline reported a loss, but management forecasted it would deliver a profit in Q2.
We sold our shares on Monday to avoid earnings risk. In hindsight, holding them through the announcement would have resulted in shares being much closer to our cost basis. However, predicting what a company will report and, more importantly, how the market will respond is impossible. UAL could have just as easily sold off despite meeting revenue targets and reporting a smaller-than-expected loss.
While I remain a travel bull, concerns about an economic slowdown and its effect on consumers/travelers persist. With earnings out of the way, the stock may begin to trade based on consumer spending data, which is likely to be soft over the next several months.
For this reason, I have decided not to initiate another put position in the stock at this time. We are booking the loss and I will be looking for new opportunities to trade instead.
Current Stock Price: $45.48
Loss: $5.66, or $566 per 100 shares