United Airlines (NASDAQ: UAL) is set to report its Q1 2024 results on April 17, with revenues expected to come in slightly below the consensus estimate at $12.4 billion. Despite this, the company is expected to see year-over-year growth of about 8%, with bottom-line earnings also ahead of expectations at $(0.45) per share on an adjusted basis. While the results for Q1 may be mixed, analysts believe there is room for United Airlines stock to grow from its current levels of under $45.
In recent years, UAL stock has seen minimal changes, underperforming the S&P 500 index. Returns for the stock were 1% in 2021, -14% in 2022, and 9% in 2023, compared to 27% in 2021, -19% in 2022, and 24% in 2023 for the S&P 500. Despite this, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P each year over the same period, indicating better returns with less risk.
Uncertainties in the macroeconomic environment, such as high oil prices and elevated interest rates, may impact UAL’s performance going forward. However, from a valuation perspective, analysts believe UAL stock is attractive, with a forecasted price target of $60 per share, reflecting a nearly 40% upside from current levels. The company has guided adjusted earnings per share to be in the range of $9.00 and $11.00 for the full year 2024.
United Airlines is expected to benefit from robust travel demand in the upcoming quarter, but the grounding of Boeing 737 MAX earlier in the year may impact overall performance. Safety-related incidents and delays in starting new international routes have affected the company’s operations. In the previous quarter, revenues for United Airlines were up 10% year-over-year, while adjusted pre-tax margin fell to 6.2% due to higher revenues offset by margin contraction.
While the average fuel price per gallon declined in the previous quarter, this metric may rise sequentially in Q1 due to higher average fuel prices. The average U.S. Gulf Coast Kerosene Jet fuel price per gallon rose from $2.39 at the end of December last year to $2.59 by the end of March 2024. Overall, United Airlines stock appears undervalued, but investors should also consider how the company’s peers are faring on key metrics to make informed investment decisions.
