On Thursday, Citi maintained its Buy rating on United Continental (NASDAQ: UAL) and increased the stock's price target to $80.00 from the previous $73.00. This adjustment reflects the firm's expectation of stronger revenue per available seat mile (RASM) and a slight reduction in the airline's capital expenditures for the year 2024. In addition, the first quarter results of 2024 were factored into the revised model.
The updated financial model includes a shift in Citi's earnings per share (EPS) estimates for United Airlines. The forecasts for the carrier's EPS have been adjusted from $10.39 for the current year, $12.09 for the next year, and $14.26 for 2026, to new projections of $10.68, $13.07, and $15.50, respectively. These revisions are based on the incorporation of the latest financial data and outlook.
Citi's decision to raise the target price is also influenced by an increase in the price-to-earnings (P/E) target multiple, from 7 times to 7.5 times. When this revised multiple is applied to the slightly higher estimated EPS for 2024, the result is an elevated target price for United Continental's shares.
The airline's financial performance and future prospects appear to be promising, as indicated by the revised EPS estimates and the increased price target. With the maintained Buy rating, Citi signals confidence in United Continental's potential for growth and profitability in the coming years.
United Continental's stock price target revision by Citi is based on a combination of factors, including anticipated revenue growth, lowered expected capital expenditures, and solid first-quarter results.
InvestingPro Insights
According to the latest data from InvestingPro, United Continental Holdings Inc. (NASDAQ: UAL) is currently trading at a low earnings multiple with a P/E ratio of 5.13, which is even more attractive when adjusted for the last twelve months as of Q1 2024, at 4.61. This suggests that United Airlines might be undervalued compared to its historical earnings. The company has also experienced a significant return over the last week, with a 1-week price total return of 13.24%, and a strong return over the last three months, with a 3-month price total return of 22.55%. These returns indicate a positive trend in the stock's performance.
InvestingPro Tips point out that United Airlines operates with a significant debt burden, yet it's important to note that analysts predict the company will be profitable this year. Moreover, the company has been profitable over the last twelve months, which may reassure investors about its financial health. While the stock does not pay a dividend, which might be a consideration for income-focused investors, the recent price uptick over the last six months, at 34.49%, could be attractive for growth-oriented investors.
For those looking to delve deeper into United Airlines' financials and stock analysis, InvestingPro offers additional insights. There are currently 10 more InvestingPro Tips available, which can be accessed by visiting https://www.investing.com/pro/UAL. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing an even greater value for those seeking comprehensive investment data and analysis.
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