United Airlines (NASDAQ: UAL) has seen a significant increase in its net income, surging by 3.5 times year-over-year to $2.6 billion in 2023. This growth can be attributed to higher revenues and lower fuel costs. The company’s stock performance has also seen gains, with UAL stock increasing by 15% from early January 2021 to around $53 currently. However, the stock’s performance has not been consistent, with returns of 1% in 2021, -14% in 2022, and 9% in 2023, underperforming the S&P 500 in 2021 and 2023.
Despite the challenges of consistently beating the S&P 500, United Airlines’ operating income has more than doubled from $2.5 billion in 2022 to $5.3 billion in the last twelve months. The company’s operating profit margin expanded from 5.5% to 9.7% over the same period, with SG&A expenditures as a percentage of revenue rising slightly. United Airlines also saw a decrease in total fuel expenses despite higher sales, with the average fuel price per gallon falling by 17% in 2023.
Along with the expansion of operating income, United Airlines saw its net income rise from $737 million in 2022 to $2.6 billion in 2023, primarily due to increased sales and disciplined spending. The company’s net income margin expanded from 1.8% to 6.2% in 2023. The outlook for 2024 looks positive, with expected adjusted EPS of $3.75 to $4.25 for Q2 and $9 to $11 for the full year. Revenue growth is expected to be driven by continued capacity expansion and elevated yields.
United Airlines’ revenue of $12.5 billion in Q1 2024 was up 9.7% year-over-year, with passenger revenue per available seat mile increasing by 1%. The company’s strong travel demand should allow for continued expansion of its margin profile in the coming years, assuming stability in fuel prices. Despite a 25% rise in 2023, UAL stock appears to have room for further growth. It is important to also consider how United Airlines’ peers fare on important metrics for a comprehensive understanding of the industry.
The current uncertain macroeconomic environment, with high oil prices and elevated interest rates, could pose challenges for United Airlines in the future. However, from a valuation perspective, UAL stock looks to have room for growth, with an estimated valuation of $60 per share, reflecting over 10% upside from current levels. Overall, United Airlines’ strong financial performance and positive outlook for 2024 suggest potential for continued growth and success in the coming years.
