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UAL Down 16.5% in Past Three Months: What's Hurting the Stock?

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United Airlines (UAL - Free Report) , a prominent Chicago-based airline, has seen its shares decline 16.5% over the past three months compared to its industry’s 1.7% rise during the same period. The S&P 500 composite index rose 6.5% in the same time frame, while the Zacks Transportation sector gained 22.6%. The company currently has a market capitalization of $14.48 billion.

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Factors Impeding UAL's Growth

United Airlines has been struggling on the revenue front of late due to overcapacity related to summer flights.  As a result of this, the airline reported lower-than-expected revenues in the second quarter of 2024.  The airline is also being hurt by low pricing power.

The practice of price cuts by low-cost carriers, as they struggle to fill the excess seats this summer, is hurting even bigger rivals. Discount carriers have added too many seats that they are now attempting to fill by lowering fares and compelling airline majors to do the same to stay competitive. This phenomenon dampened UAL’s pricing power. 

Apart from the abovementioned woes, high labor and fuel costs have been hurting the company’s bottom line. The Zacks Consensus Estimate for UAL’s 2024 earnings is pegged at $9.63 per share, which indicates a decline of 4.2% from 2023’s actuals. The consensus mark for current-quarter earnings is pegged at $3.02 per share, which indicates a 17.3% drop year over year.

Moreover, United Airlines’ liquidity position is discouraging. The airline ended the second quarter of 2024 with a current ratio (a measure of liquidity) of 0.77. A current ratio of less than 1 implies that the company does not have sufficient cash to meet its current debt obligations.

The airline operator, presently carrying a Zacks Rank #3 (Hold), has a disappointing track record of missing the Zacks Consensus Estimate in two of the trailing four quarters and surpassing twice. The average miss is 4%.

Some Tailwinds to Consider for UAL Stock

To navigate the abovementioned revenue woes, United Airlinesis trimming capacity by doing away with loss-making routes. It intends toreduce domestic capacity by approximately three points in the fourth quarter of 2024.

United Airlines' commitment to achieving 100% green net-zero emissions by 2050, without relying on carbon offsets, is a significant step forward in environmental sustainability. The airline's historic flight powered by 100% sustainable aviation fuel showcases its dedication to reducing its carbon footprint and sets a new standard for the industry.

United Airlines boasts an impressive VGM Score of A. VGM Score helps to identify stocks with the most attractive value, the best growth and the most promising momentum.

Stocks to Consider

Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Westinghouse Air Brake Technologies (WAB - 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 25.2% 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 17.2% in the past year.

WAB sports a Zacks Rank #1 at present and has an expected earnings growth rate of 26% for the current year.

The company has a discouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters. The average beat is 11.8%. Shares of WAB have climbed 49.4% in the past year.

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