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Is United Airlines Stock a Smart Investment Option for the New Year?
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United Airlines (UAL - Free Report) shares had a phenomenal run in 2024, skyrocketing 135.3% mainly due to upbeat air travel demand. UAL shares outperformed the Zacks Airline industry and fellow industry players like Delta Air Lines (DAL - Free Report) and American Airlines (AAL - Free Report) in the year just gone by.
Price Performance for 2024
Image Source: Zacks Investment Research
Given UAL’s highly impressive rally, investors might wonder if the opportunity to add this high-flying airline stock to their portfolio has passed. However, we believe United Airlines has a lot going in its favor, and this rally is far from over. The stock holds substantial upside potential as we step into 2025. UAL currently has a Momentum Score of A. Technical indicators suggest continued strong performance for UAL. The stock trades above its 50-day moving average, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in UAL’s prospects.
50-Day Moving Average Data of UAL Stock
Image Source: Zacks Investment Research
Reasons Why We Remain Bullish on UAL Stock
Upbeat Passenger Volumes: Improvement in air travel demand following the end of the pandemic bodes well for United Airlines' top line. While air travel demand is particularly strong on the leisure front, business travel has also made an encouraging comeback. Owing to buoyant air travel demand, United Airlines posted a significant year-over-year increase (5.7%) in revenues during the first nine months of 2024. This year-over-year increase in the top line was driven by a 5.3% rise in passenger revenues (accounting for 90.9% of the top line). UAL's ability to capitalize on strong corporate travel volumes and premium leisure demand is supporting growth.
Low Fuel Costs:The southward movement of oil prices bodes well for the bottom-line growth of UAL. This is because fuel expenses are a significant input cost for airlines. Notably, oil prices declined 14% in the July-September period mainly due to the weakening global demand. China's economy, the world’s largest oil importer, struggled with a slowdown in manufacturing, shrinking for the fifth consecutive month by September. In the first nine months of 2024, expenses on aircraft fuel at UAL decreased 3% year over year to $9.08 billion. The average fuel price per gallon decreased to $2.73 in the first nine months of 2024 from $2.97 in the first nine months of 2023.
Shareholder Returns: UAL’s financial discipline underpins its robust cash flow and shareholder returns. On a shareholder-friendly note, in October, UAL’s management announced a $1.5 billion share buyback plan. This was the first buyback program since the COVID-19 pandemic, as restrictions under the CARES Act prohibited airlines from paying dividends or buying back shares till Sept. 30, 2022. The new buyback program highlights UAL’s financial progress. United Airlines aims to continue repurchasing shares throughout 2025. This program will be funded by free cash flow generation as the carrier expects its profitability to improve.
Favorable Earnings & Sales Estimate Movements: The Zacks Consensus Estimate for 2025 earnings, currently pegged at $11.88 per share, has been revised 2.7% upward over the past 60 days. The Zacks Consensus Estimate for 2025 sales, currently pegged at $61.27 billion, indicates 7.9% growth from the 2024 expectations. The Zacks Consensus Estimate for 2025 earnings per share, suggests 11.2% growth from the 2024 expectations.
Compelling Stock Valuation: From a valuation perspective, United Airlines is trading cheaper than the industry. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.56X, lower than the industry average of 1.19X. The company has a Value Score of A.
Image Source: Zacks Investment Research
Is it the Right Time to Buy UAL Stock Now?
United Airlines is well-positioned for continued success in 2025. With air travel demand expected to remain healthy, UAL stock should continue to perform well. UAL’s expansion strategy, coupled with a focus on premium demand, serves it well and positions the Chicago-based carrier to capture a larger slice of the recovering travel market. Donald Trump's re-election is a positive for the airline industry and is expected to lead to a return to the pro-business stance that characterized his first term.
Northward movements in 2025 earnings and sales estimates further point to a promising outlook. These strengths make UAL an attractive choice for investors seeking exposure to the airline industry. The company’s current Zacks Rank #1 (Strong Buy) supports our thesis. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Is United Airlines Stock a Smart Investment Option for the New Year?
United Airlines (UAL - Free Report) shares had a phenomenal run in 2024, skyrocketing 135.3% mainly due to upbeat air travel demand. UAL shares outperformed the Zacks Airline industry and fellow industry players like Delta Air Lines (DAL - Free Report) and American Airlines (AAL - Free Report) in the year just gone by.
Price Performance for 2024
Given UAL’s highly impressive rally, investors might wonder if the opportunity to add this high-flying airline stock to their portfolio has passed. However, we believe United Airlines has a lot going in its favor, and this rally is far from over. The stock holds substantial upside potential as we step into 2025. UAL currently has a Momentum Score of A. Technical indicators suggest continued strong performance for UAL. The stock trades above its 50-day moving average, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in UAL’s prospects.
50-Day Moving Average Data of UAL Stock
Reasons Why We Remain Bullish on UAL Stock
Upbeat Passenger Volumes: Improvement in air travel demand following the end of the pandemic bodes well for United Airlines' top line. While air travel demand is particularly strong on the leisure front, business travel has also made an encouraging comeback. Owing to buoyant air travel demand, United Airlines posted a significant year-over-year increase (5.7%) in revenues during the first nine months of 2024. This year-over-year increase in the top line was driven by a 5.3% rise in passenger revenues (accounting for 90.9% of the top line). UAL's ability to capitalize on strong corporate travel volumes and premium leisure demand is supporting growth.
Low Fuel Costs:The southward movement of oil prices bodes well for the bottom-line growth of UAL. This is because fuel expenses are a significant input cost for airlines. Notably, oil prices declined 14% in the July-September period mainly due to the weakening global demand. China's economy, the world’s largest oil importer, struggled with a slowdown in manufacturing, shrinking for the fifth consecutive month by September. In the first nine months of 2024, expenses on aircraft fuel at UAL decreased 3% year over year to $9.08 billion. The average fuel price per gallon decreased to $2.73 in the first nine months of 2024 from $2.97 in the first nine months of 2023.
Shareholder Returns: UAL’s financial discipline underpins its robust cash flow and shareholder returns. On a shareholder-friendly note, in October, UAL’s management announced a $1.5 billion share buyback plan. This was the first buyback program since the COVID-19 pandemic, as restrictions under the CARES Act prohibited airlines from paying dividends or buying back shares till Sept. 30, 2022. The new buyback program highlights UAL’s financial progress. United Airlines aims to continue repurchasing shares throughout 2025. This program will be funded by free cash flow generation as the carrier expects its profitability to improve.
Favorable Earnings & Sales Estimate Movements: The Zacks Consensus Estimate for 2025 earnings, currently pegged at $11.88 per share, has been revised 2.7% upward over the past 60 days. The Zacks Consensus Estimate for 2025 sales, currently pegged at $61.27 billion, indicates 7.9% growth from the 2024 expectations. The Zacks Consensus Estimate for 2025 earnings per share, suggests 11.2% growth from the 2024 expectations.
Compelling Stock Valuation: From a valuation perspective, United Airlines is trading cheaper than the industry. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.56X, lower than the industry average of 1.19X. The company has a Value Score of A.
Is it the Right Time to Buy UAL Stock Now?
United Airlines is well-positioned for continued success in 2025. With air travel demand expected to remain healthy, UAL stock should continue to perform well. UAL’s expansion strategy, coupled with a focus on premium demand, serves it well and positions the Chicago-based carrier to capture a larger slice of the recovering travel market. Donald Trump's re-election is a positive for the airline industry and is expected to lead to a return to the pro-business stance that characterized his first term.
Northward movements in 2025 earnings and sales estimates further point to a promising outlook. These strengths make UAL an attractive choice for investors seeking exposure to the airline industry. The company’s current Zacks Rank #1 (Strong Buy) supports our thesis. You can see the complete list of today’s Zacks #1 Rank stocks here.