Dec 2 (Reuters) - Morgan Stanley raised U.S. airlines UAL Corp and AMR Corp to 'overweight' from 'equal-weight,' citing their strong capital positions and favorable airline and oil price trading dynamics in the near term.
Shares of UAL jumped 12 percent, while those of AMR rose 7 percent in Wednesday afternoon trade.
The brokerage noted that Fort Worth, Texas-based AMR's position was strengthened by its recent liquidity enhancing transactions, particularly at a time when industry trends were on the mend.
The parent of American Airlines netted $4.2 billion in liquidity and aircraft financing in September.
'Though our projected headline EPS losses and difficult union negotiations are risks, we believe investor willingness to bet on the cycle using this highly leveraged airline equity is likely to overcome these marginal negatives,' Morgan Stanley analyst William Greene wrote in a note to clients.
Greene also said Chicago-based UAL's underperformance through the downturn was likely to become a relative positive as investors focus on improving year-over-year revenue trends over the coming quarters.
'Recent liquidity injections are likely to improve investor willingness to look through the cycle into 2011, when the company generates significant free cash flow per our estimates,' he noted.
United Airlines parent UAL completed financings amounting to more than $1.5 billion in the third quarter and early fourth quarter.
Shares of UAL were up 10 percent at $9.11 in afternoon trade on Nasdaq. AMR stock was trading up 7 percent at $6.72 on the New York Stock Exchange.
(Reporting by Biswarup Gooptu in Bangalore; Editing by Anne Pallivathuckal) Keywords: USAIRLINES/RESEARCH MORGANSTANLEY (biswarup.gooptu@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: biswarup.gooptu.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Shares of UAL jumped 12 percent, while those of AMR rose 7 percent in Wednesday afternoon trade.
The brokerage noted that Fort Worth, Texas-based AMR's position was strengthened by its recent liquidity enhancing transactions, particularly at a time when industry trends were on the mend.
The parent of American Airlines netted $4.2 billion in liquidity and aircraft financing in September.
'Though our projected headline EPS losses and difficult union negotiations are risks, we believe investor willingness to bet on the cycle using this highly leveraged airline equity is likely to overcome these marginal negatives,' Morgan Stanley analyst William Greene wrote in a note to clients.
Greene also said Chicago-based UAL's underperformance through the downturn was likely to become a relative positive as investors focus on improving year-over-year revenue trends over the coming quarters.
'Recent liquidity injections are likely to improve investor willingness to look through the cycle into 2011, when the company generates significant free cash flow per our estimates,' he noted.
United Airlines parent UAL completed financings amounting to more than $1.5 billion in the third quarter and early fourth quarter.
Shares of UAL were up 10 percent at $9.11 in afternoon trade on Nasdaq. AMR stock was trading up 7 percent at $6.72 on the New York Stock Exchange.
(Reporting by Biswarup Gooptu in Bangalore; Editing by Anne Pallivathuckal) Keywords: USAIRLINES/RESEARCH MORGANSTANLEY (biswarup.gooptu@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: biswarup.gooptu.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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