Shares of United Airlines, identified by the ticker symbol UAL, increased significantly, reaching their highest level since early 2020. This rise followed the company’s latest quarterly update in mid-October, where it surpassed its own bottom-line expectations. Management attributed this success to robust demand during a particularly lucrative summer flying season.
The airline’s stock has risen by 110% in the past year, providing a reason for shareholder satisfaction, while potential investors might question if they have missed their chance to invest.
United Airlines is optimistic about continuing its upward trend. The difficulties faced during the pandemic are now regarded as a distant past, according to United’s third-quarter earnings report. The company expressed confidence in having reached a point of sustainable profitability. The quarter was marked as the busiest in the company’s history, with revenue passenger volumes soaring and a record 552,000 passengers carried in July. Revenue grew by 2.5% compared to the previous year, resulting in adjusted diluted earnings per share (EPS) of $3.33, which exceeded the anticipated range of $2.75 to $3.25.
Although some metrics showed volatility, such as a 1.1% year-over-year decline in yield due to increased capacity, United noted strong performance in its domestic operations. The premium cabin’s revenue per available seat mile (RASM) rose by 2%, and basic economy volumes increased significantly. Internationally, United anticipates yield improvements in Asia-Pacific and Latin America regions as capacity normalizes.
For the upcoming quarter, United aims for an EPS between $2.50 and $3.00, approximately 38% higher than the previous year’s fourth quarter. The company also introduced a $1.5 billion share buyback program, representing approximately 6% of its market capitalization. This marks United’s first buyback initiative since it was suspended in 2020 at the pandemic’s start, indicating management’s optimistic outlook on continuing its positive earnings trajectory.
United Airlines remains attractive for investors due to its ongoing consolidation of industry leadership, which aligns with its commitment to customer service excellence. A resurgence in business air travel, United’s traditional stronghold, due to policies urging employees back to offices, is promoting growth. CEO Scott Kirby highlighted the positive impact of these dynamics on corporate traffic revenue growth during the third-quarter conference call, presenting favorable conditions leading into 2025.
The overall economic environment, including stable leisure travel demand, supports this growth. United’s projected EPS of $10.27 this year is anticipated to rise by 18% to $12.10 in 2025. Currently, United shares are trading at 6.2 times the 2025 EPS estimate, which is below peers like Delta Air Lines at 7.5 and American Airlines at 6.8. This indicates that United might still hold value despite this year’s stock price rally, suggesting financial momentum could justify a higher earnings premium.
United Airlines is seen as a promising investment, offering potential long-term gains despite market uncertainties that could cause short-term fluctuations.