Citi has affirmed a positive outlook on United Continental (NASDAQ: UAL) shares, maintaining a Buy rating and a $90.00 price target.
The firm's analysis included several forecast adjustments for the airline, taking into account various operational and market factors.
The adjustments to United Airlines' forecast by Citi include a projection of lower available seat mile (ASM) growth and a slight year-over-year decrease in fourth-quarter 2024 revenue per available seat mile (RASM), attributed to election-related effects.
Additionally, the forecast considers lower fuel prices and anticipates an increase in RASM and costs per available seat mile, excluding fuel, for 2025.
Citi has updated its earnings per share (EPS) estimate for United Airlines for the third quarter of 2024, raising it from $2.98 to $3.09.
The full-year EPS estimates have been adjusted from $10.15 for 2024, $11.96 for 2025, and $13.33 for 2026, to $9.76, $11.78, and $13.04, respectively.
Despite a slight decrease in the 2025 EPS forecast, Citi has slightly increased the target multiple from 7.5x to 7.6x 2025 EPS.
In other recent news, United Airlines announced the retirement of Linda Jojo, the Executive Vice President and Chief Customer Officer, effective January 2, 2025. This development is part of the airline's ongoing management transitions.
Meanwhile, Air Canada has successfully averted a potential strike by reaching a tentative agreement with the Air Line Pilots Association, ensuring the continuation of their regular flight operations.
United Airlines also revealed a partnership with SpaceX to offer free Starlink Wi-Fi on its flights, aiming to enhance the passenger experience with high-speed internet connectivity. In contrast, American Airlines (NASDAQ:AAL) adjusted its flight capacity, with a slight 0.5% increase in system capacity for February 2025, marking a deviation from the broader industry trend of capacity reduction.
According to the U.S. Department of Transportation, U.S. airlines, including United and American Airlines, have maintained a low flight cancellation rate of 1.6% this year, despite a surge in summer travel.
InvestingPro Insights
To complement Citi's analysis, recent data from InvestingPro offers additional insights into United Airlines' financial position. The company's P/E ratio of 6.37 and adjusted P/E ratio of 5.94 for the last twelve months as of Q2 2024 align with Citi's valuation approach, suggesting the stock may be undervalued relative to its earnings potential. This is further supported by an InvestingPro Tip indicating that UAL is trading at a low earnings multiple.
United Airlines has demonstrated strong financial performance, with revenue reaching $55.63 billion in the last twelve months as of Q2 2024, representing a 9.34% growth. The company's profitability is evident from its $5.01 billion in adjusted operating income and an operating income margin of 9.01% over the same period. These figures provide context to Citi's earnings projections and support the optimistic outlook.
An InvestingPro Tip highlights that UAL has shown a strong return over the last three months, which is quantified by the impressive 18.06% price total return over that period. This recent performance may contribute to Citi's decision to maintain its Buy rating and $90.00 price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for United Airlines, providing a deeper understanding of the company's financial health and market position.
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