The Zacks Analyst Blog Highlights: United Continental Holdings, Southwest Airlines, Barrick Gold, Kinross Gold and Goldcorp

CHICAGO, Jan. 3, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include United Continental Holdings (NYSE: UAL), Southwest Airlines (NYSE: LUV), Barrick Gold Corporation (NYSE: ABX), Kinross Gold Corporation (NYSE: KGC) and Goldcorp Incorporated (NYSE: GG).

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Here are highlights from Friday's Analyst Blog:

United Strikes Deal with IBT

After a long battle between United Continental Holdings (NYSE: UAL) and International Brotherhood of Teamsters (IBT), both parties have now struck a new labor deal. 

Recently, United Airlines, a wholly owned subsidiary of United Continental, reported that a new labor contract was approved by 5,500 airplane mechanics represented by IBT. The agreement deals with factors like compensation benefits and work rules, including an $11,500 bonus and recovery of items that were lost when United went through a bankruptcy in 2009.

Looking back, United Airlines and IBT agreed upon a tentative labor agreement for mechanics at United in March and was awaiting ratification by the members. In September, talks of expediting the ratification surfaced before the mediation with the National Mediation Board was scheduled for November.

We believe that the company's effort to integrate its work force will bode well for its operational efficiency and serve its plan to reach a single contract covering employees of United Airlines and Continental Airlines. In November 2010, the company had already received approval on a collective bargaining agreement by Continental mechanics represented by IBT. The company believes that a single contract is highly beneficial as the merged airline focuses on curtailing costs, contributing to annual savings of approximately $1.2 billion by 2013.

In October 2010, United and Continental merged to form United Continental Holdings. However, labor unions of both companies remained disintegrated, causing union disputes.

United and Continental are both highly unionized companies unlike its peer Southwest Airlines (NYSE: LUV), which has so far been successful in integrating its labor force. As of December 31, 2010, United Continental had approximately 86,000 employees, of whom approximately 72% were represented by various U.S. labor organizations. Thus, union disputes, employee strikes or slowdowns, and other labor related disruptions may delay expected merger synergies and increase labor costs or disputes, thereby hurting profitability of the company.

Currently, we maintain our long-term Neutral recommendation on United Continental supported by a Zacks #3 (Hold) Rank.

The Lust for Gold

In the face of falling equity values across the globe, gold has emerged as an attractive asset class.

Since the middle of the year, global equity values are estimated to have fallen by as much as $10 trillion, more than two-thirds of the U.S. GDP. A bear market, the sharp slowdown in global economic growth and weak investor sentiment have created a perfect environment for the gold rush.

Gold demand in the third quarter of 2011 reached 1,054 tons, an increase of 6% from the same period last year. The demand in value terms is $58 billion, an all-time high. The growth was driven by investment demand, which rose by 33% year-over-year to 468 tons or $26 billion, a record quarterly value.

The quarterly average price rose 39% from the year earlier level to $1,702, while the price of gold touched a new peak of $1,895 in the first week of September. Demand for gold bars and coins increased 29% to reach 391 tons, up from 303 tons in the same quarter in 2010. Demand for bars and coins in the third quarter was $21 billion compared to $12 billion in the same quarter of 2010.

Gold ETFs and similar products witnessed inflows of 78 tons in the third quarter of 2011, 58% above the year-earlier level. Global demand for gold jewelry of 466 tons in the third quarter of 2011 was 10% below the year-earlier level.  

Central banks continued to shore up their gold reserves (net purchases of 148 tons), as they consciously raised their allocation for the yellow metal vis-a-vis their total reserves in their quest for safe harbors.

Gold supply was 1,034 tons in the third quarter of 2011, 2% higher than 1,013 tons a year ago. Mine output increased to 746 tons from 711 tons – an increase of 5% from the third quarter of 2010.

Should the demand-supply gap in the third quarter itself be any indication, the market is in the midst of a pent-up demand for gold. The metal being the odds-on-favorite among asset classes, its demand could only gather momentum as investors scramble for safe havens in these troubled times.

Gold miners, like Barrick Gold Corporation (NYSE: ABX), Kinross Gold Corporation (NYSE: KGC) and Goldcorp Incorporated (NYSE: GG) will have to feed this demand. Incidentally, these stocks are all quoting at close to their 52-week lows.

In 1971, the Nixon shock officially signaled the cessation of the convertibility of the dollar to gold and the Bretton Woods system came to an end. Forty years later, gold appears to have emerged as a major competitor as a reserve asset.

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