United Airlines (NASDAQ: UAL) is set to report its Q1 2024 results, with revenues expected to come in at $12.4 billion, slightly below the consensus estimate of $12.5 billion. The bottom line is likely to be $(0.45) on a per-share and adjusted basis, above the consensus estimate of $(0.54). Despite mixed results projected for Q1, there is room for the stock to grow from its current levels of under $45. Trends that could drive United Airlines’ results include its stock performance, uncertainties in the macroeconomic environment, and the impact of the grounding of Boeing 737 MAX earlier in the year.
UAL stock has seen little change in recent years, with lackluster performance compared to the S&P 500 index. While the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023, UAL underperformed with returns of 1%, -14%, and 9% in the same years, respectively. The Trefis High Quality Portfolio, on the other hand, has consistently outperformed the S&P 500 over the same period, with better returns and less risk. From a valuation perspective, UAL stock is considered attractive, with an estimated valuation of $60 per share, reflecting nearly a 40% upside from current levels.
In the current uncertain macroeconomic environment, with high oil prices and elevated interest rates, the question remains whether UAL will underperform the S&P 500 over the next 12 months or see a strong jump in performance. The company’s adjusted earnings per share guidance for 2024 is in the range of $9.00 to $11.00, with an estimated 40% upside potential based on a valuation of $60 per share. The grounding of Boeing 737 MAX earlier in the year may have a negative impact on United Airlines’ overall performance, as the company faced safety-related incidents that led to delays in starting new international routes.
In the previous quarter, United Airlines reported revenues of $13.6 billion, up 10% year-over-year, with a 15% rise in available seat miles. However, the load factor was down 290 bps, and passenger revenue per available seat mile also declined by 3%. The company’s adjusted pre-tax margin fell to 6.2% from 9.0% in the prior-year quarter, leading to a 19% year-over-year decrease in the bottom line to $2.00 on a per-share and adjusted basis in Q4’23. The average fuel price per gallon declined 12% year-over-year, but may rise sequentially in Q1 due to higher average fuel prices weighing on the overall pre-tax margin.
Overall, while United Airlines stock appears undervalued, it is important to compare how other United Airlines peers fare on key metrics. The company continues to benefit from robust travel demand, but challenges such as the grounding of Boeing 737 MAX and safety-related incidents earlier in the year may impact its performance. With uncertainties in the macroeconomic environment and the company’s guidance for 2024, it remains to be seen how United Airlines will perform in the coming months.
