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Here's Why You Should Retain United Airlines (UAL) Stock Now
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United Airlines’ (UAL - Free Report) top line is bolstered by strong air travel demand. The company’s efforts to expand are praiseworthy. However, elevated operating expenses and weak liquidity are hurting the company’s prospects.
Factors Favoring UAL
Upbeat air travel demand bodes well for United Airlines as it delivered a robust top-line performance in the second quarter of 2024. In this quarter, United Airlines saw a 5.5% increase in Revenue Passenger Miles and an 8.3% rise in capacity, measured in Available Seat Miles. The company expects this positive trend to continue in the future.
Management expects third-quarter earnings per share in the $2.75-$3.25 range. As for the full year, UAL continues to expect the EPS in the range of $9-$11.
United Airlines' efforts to expand are commendable. Showcasing its commitment to enhancing connectivity and meeting the growing demand for travel, the airline announced nearly 200 new flights to Milwaukee and Chicago. It resumed two daily flights from New York to Tel Aviv and inaugurated routes to Georgetown, Guyana.
Twelve more domestic routes were launched or reinstated, connecting major cities across the United States and Canada. Moreover, UAL added seasonal flights between Porto, Brussels, and Rome to New York and resumed Reykjavik to New York. This expansion not only benefits travelers but also strengthens United Airlines' position in the competitive aviation market.
UAL‘s efforts to improve customer satisfaction are also praiseworthy. The United app is the most downloaded airline app, with 89% of customers engaging digitally on travel days. The new seat preference feature benefited more than 30% of users in the second quarter, and 47% of passengers were rebooked through automated or self-service options. Limited-edition Wrexham AFC-themed amenity kits and pajamas enhanced the travel experience on select long-haul flights.
Key Risks
United Airlines’ bottom line is grappling with surging operating expenses. In the second quarter of 2024, total operating expenses increased by 3.1% year over year. This rise in operating expenses was primarily driven by labor and fuel costs.
Labor costs comprising salaries and benefits, accounting for 31.4% of the total operating expenses, increased by 10.5% year over year. UAL's Aviate Academy launched a pilot development program with Texas Southern University and awarded more than $200,000 in scholarships.
Aircraft fuel expenses, accounting for 24% of the total operating expenses, rose by 11.1% year over year. The average aircraft fuel price per gallon increased 3.8% year over year to $2.76.
The company exited the second quarter of 2024 with a current ratio (a measure of liquidity) of 0.77. A current ratio of less than 1 indicates that the company is likely to struggle to meet its short-term obligations. Reduced pricing power is another concern.
Shares of UAL have declined 28.1% in the past year compared to its industry’s growth of 22.7% in the same period.
Image Source: Zacks Investment Research
Zacks Rank
UAL currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Kirby Corporation (KEX - Free Report) .
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have risen 3.5% in the past year.
KEX holds a Zacks Rank #2 (Buy) at present and has an expected earnings growth rate of 40% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 8.7%. Shares of Kirby have climbed 40.9% in the past year.
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Here's Why You Should Retain United Airlines (UAL) Stock Now
United Airlines’ (UAL - Free Report) top line is bolstered by strong air travel demand. The company’s efforts to expand are praiseworthy. However, elevated operating expenses and weak liquidity are hurting the company’s prospects.
Factors Favoring UAL
Upbeat air travel demand bodes well for United Airlines as it delivered a robust top-line performance in the second quarter of 2024. In this quarter, United Airlines saw a 5.5% increase in Revenue Passenger Miles and an 8.3% rise in capacity, measured in Available Seat Miles. The company expects this positive trend to continue in the future.
Management expects third-quarter earnings per share in the $2.75-$3.25 range. As for the full year, UAL continues to expect the EPS in the range of $9-$11.
United Airlines' efforts to expand are commendable. Showcasing its commitment to enhancing connectivity and meeting the growing demand for travel, the airline announced nearly 200 new flights to Milwaukee and Chicago. It resumed two daily flights from New York to Tel Aviv and inaugurated routes to Georgetown, Guyana.
Twelve more domestic routes were launched or reinstated, connecting major cities across the United States and Canada. Moreover, UAL added seasonal flights between Porto, Brussels, and Rome to New York and resumed Reykjavik to New York. This expansion not only benefits travelers but also strengthens United Airlines' position in the competitive aviation market.
UAL‘s efforts to improve customer satisfaction are also praiseworthy. The United app is the most downloaded airline app, with 89% of customers engaging digitally on travel days. The new seat preference feature benefited more than 30% of users in the second quarter, and 47% of passengers were rebooked through automated or self-service options. Limited-edition Wrexham AFC-themed amenity kits and pajamas enhanced the travel experience on select long-haul flights.
Key Risks
United Airlines’ bottom line is grappling with surging operating expenses. In the second quarter of 2024, total operating expenses increased by 3.1% year over year. This rise in operating expenses was primarily driven by labor and fuel costs.
Labor costs comprising salaries and benefits, accounting for 31.4% of the total operating expenses, increased by 10.5% year over year. UAL's Aviate Academy launched a pilot development program with Texas Southern University and awarded more than $200,000 in scholarships.
Aircraft fuel expenses, accounting for 24% of the total operating expenses, rose by 11.1% year over year. The average aircraft fuel price per gallon increased 3.8% year over year to $2.76.
The company exited the second quarter of 2024 with a current ratio (a measure of liquidity) of 0.77. A current ratio of less than 1 indicates that the company is likely to struggle to meet its short-term obligations. Reduced pricing power is another concern.
Shares of UAL have declined 28.1% in the past year compared to its industry’s growth of 22.7% in the same period.
Image Source: Zacks Investment Research
Zacks Rank
UAL currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Kirby Corporation (KEX - Free Report) .
C.H. Robinson Worldwide currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. CHRW has an expected earnings growth rate of 27.4% for the current year.
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have risen 3.5% in the past year.
KEX holds a Zacks Rank #2 (Buy) at present and has an expected earnings growth rate of 40% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 8.7%. Shares of Kirby have climbed 40.9% in the past year.