On Wednesday, CFRA analyst Ana Garcia upgraded United Continental (NASDAQ:UAL) stock rating from Hold to Buy, setting a new price target of $123, up from the previous target of $100. The upgrade reflects confidence in United Continental's operational efficiency and profitability. According to InvestingPro data, 10 analysts have recently revised their earnings estimates upward, with analyst targets ranging from $36 to $150. Based on InvestingPro's Fair Value analysis, the stock appears slightly overvalued at current levels.
Garcia cites United Continental's strong fourth-quarter performance, where adjusted earnings per share (EPS) reached $3.26, a 63% increase year-over-year, surpassing estimates by $0.23. The company's revenue also exceeded expectations at $14.7 billion, marking an 8% rise from the previous year. This success was driven by growth in various revenue streams, including Passenger, Cargo, and Ancillary revenues. The company's trailing twelve-month revenue stands at $56 billion, with a healthy gross profit margin of 33.3%. Want deeper insights? InvestingPro subscribers get access to over 30 additional financial metrics and exclusive analysis.
The analyst highlighted the airline's ability to capture demand across different customer segments, with revenue from Premium Cabin, Loyalty Program, and Basic Economy growing by 10%, 12%, and 20%, respectively. Despite inflationary pressures, United Continental managed to decrease its Cost per Available Seat Mile (CASM) by 1.6% year-over-year, aided by a substantial 23.3% reduction in fuel costs.
United Continental's forward-looking strategy also played a role in the upgraded rating. The company has set a 2025 EPS target range of $11.50 to $13.50, with adjusted capital expenditures projected to be under $7 billion. Furthermore, the airline aims to achieve double-digit earnings before tax (EBT) margins, supported by network optimization and operational improvements.
While the airline has paused its "upgauging strategy" for 2025, Garcia remains optimistic about United Continental's ability to maintain profitability. The analyst's 12-month target price is based on 9.5 times the projected 2025 EPS of $12.98, which has been revised up from $12.12. The firm has also set a 2026 EPS estimate at $14.35, indicating continued positive expectations for the airline's financial trajectory. Currently trading at a P/E ratio of 13, the stock has delivered impressive returns, with a 187% gain over the past year. InvestingPro subscribers can access the comprehensive Pro Research Report for detailed analysis of UAL's financial health and growth prospects.
In other recent news, United Airlines has been making notable strides. The company's fourth-quarter earnings report showcased an adjusted earnings per share (EPS) of $3.26, surpassing consensus estimates by 7%, according to Bernstein analysts. United's revenue also exceeded expectations across all categories, with a significant 20% increase in cargo revenue. This performance has led to positive outlooks from Bernstein and TD Cowen, both maintaining their respective Outperform and Buy ratings.
The company's board of directors has also seen changes, with Brian Noyes replacing Captain Anne Worster. This transition was not due to any disagreements regarding United's operations, policies, or practices. In addition to this, United Airlines has updated its bylaws, aligning the company's governance practices with current Delaware law and best practices.
United Airlines is expected to benefit from recent industry trends, such as a 20% drop in Brent crude oil prices and a surge in demand in the air cargo market. These developments, along with strong earnings and revenue performance, have contributed to the positive sentiment surrounding United Airlines.
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