United Airlines likely to continue profitable growth, despite uncertainties

United Airlines (NASDAQ: UAL) has focused its growth strategy on fleet expansion, technology adoption, and service diversification. In the new fiscal year, the company looks to leverage improving demand conditions and supply chain recovery to sustain growth. However, the US airline industry faces headwinds from the new import tariffs imposed by the government, fueling concerns about a potential recession.

Estimates

As the aviation giant prepares for its first-quarter earnings release, the market has an optimistic view about the outcome. The company is expected to report a profit of $0.74 per share for Q1, which marks an improvement from the prior-year quarter when it incurred a loss of $0.15 per share. The positive earnings forecast reflects an estimated 5.8% year-over-year increase in Q1 revenues to $13.26 billion. The report is expected to be out on April 15, at 4:00 pm ET.

After hitting an all-time high in January, United Airlines stock pulled back and the price has nearly halved since then. The stock dropped about 16% last week alone, aligning with the broad market selloff triggered by the new tariffs. The ongoing reduction in discretionary spending due to economic uncertainties and trade tensions may weigh on the company’s operations in the near term, given its significant exposure to the transatlantic market. However, UAL’s last closing price is up 35% from a year ago. The average target price suggests that the stock has the potential to double its value in the next twelve months.

Strong Q4

United Airlines has consistently delivered better-than-expected quarterly earnings for over two years. In the fourth quarter of 2024, total operating revenue grew 7.8% annually to $14.7 billion. At $985 million, Q4 net income was up 64%. On a per-share basis, reported earnings and adjusted earnings rose 63% each to $2.95 and $3.26, respectively. Revenue and adjusted earnings topped Wall Street’s expectations. Revenue per available seat mile was up 1.6% in the December quarter while capacity rose 6.2% year-over-year.

From United Airlines’ Q4 2024 earnings call:

“Our digital team is expanding our best-in-the-world technology by making further improvements to make the airline even more transparent and easy to do business with. And our ops team is focused on changing the unchangeable and trying to solve problems that no other airline in the world has ever even tried to fix. And we’ll continue to invest in a brand that inspires pride in employees and customers alike. This year, we expect to grow our EPS by approximately 18% at the midpoint and will deliver strong free cash flow while continuing to invest in the future.”

Turbulence

Airline companies, in general, are more vulnerable to economic uncertainties than most other industries because macro issues weigh on the demand for leisure and corporate travel. And, lower revenues, combined with fixed costs related to aircraft maintenance and lease payments, drag down profitability.

United Airlines shares closed the last trading session at $57.67 and were trading up 3.5% soon after opening on Monday. That is broadly unchanged from the stock’s price six months ago.