Earnings projections for United Airlines stock are positive, but forward guidance is more crucial in light of the current economic climate, which is marked by rising interest rates and mounting operational expenses. Even if there is a high travel demand right now, investors will be interested in the prospects of bookings and reservations for the fourth quarter of the fiscal year and beyond.
As a result of the significant improvement in the sector’s profitability, it is anticipated that the Transportation sector will report third-quarter earnings that are 48.1% higher than those of the same period a year earlier. The Transportation and Airline Industry can take heart from this encouraging trend.
On October 18th, United Airlines Holdings Inc (NASDAQ:UAL) will publish its earnings report for the third quarter.
With destinations throughout Asia, Europe, the Middle East, and Latin America, United Airlines is the second-biggest airline in the United States regarding the number of people it transports.
The projections made by UAL will provide investors with a clearer understanding of the slowdown and the extent to which inflation affects travel. More crucially, given that it is now selling at a 38 percent lower than its 52-week high, investors will want to know how any increases in operational expenses would impact the firm’s profitability.
In the second quarter, United saw a return to profitability. However, Chief Executive Officer Scott Kirby stated that the company’s primary focus is on addressing three risks that have the potential to increase over the next six to eighteen months. These risks include industry-wide operational challenges, record fuel prices, and the growing possibility of a global recession.
Although the Travel Price Index (TPI) inflation was down 1.8% in August, airline rates were up 33% yearly. This is something that investors will need to keep an eye on. Inflation might start to impact consumer demand, which would be a signal of increased operational expenses for airlines, even though it is anticipated that earnings in the Transportation industry would go up in the third quarter.
Performance of United Airlines Stock
The stock price of UAL has decreased by -22% so far this year, with the majority of the decline occurring during the second quarter as investors began to get concerned about rising prices. United has underperformed its peer group, which has decreased by 13%, even though the reduction is not as severe as the S&P 500’s -25% YTD drop.
Maintaining a lead over other airlines, such as American Airlines (AAL) and Delta Airlines (DAL), might be essential for United Airlines (UAL) shares. According to the chart located above, the price performance of UAL has been somewhere in the center of the pack over the past two years, doing better than DAL but worse than AAL.
Outlook for UAL (United Airlines Stock)
The Zacks Consensus Estimate for UAL’s Q3 profits is $2.21 per share, predicted to increase, flip from a loss in Q3 2021 and gain 316%. It is anticipated that sales will increase by 64% during the third quarter, reaching $12.70 billion. Estimates for the time have seen a considerable increase over the course of the past three months. From the beginning of the quarter, when earnings were expected to be $1.61, they have now climbed by 37%.
It is anticipated that UAL’s earnings will return to positive territory year over year, swinging from an adjusted loss of -13.94 dollars per share in FY21 to a gain of 0.45 dollars per share in FY22. Earnings for FY23 are projected to increase by an additional 1,189% and reach $5.80 per share. Even if this is not back to the levels before the epidemic, the significant increase in earnings is undoubtedly a start in the right direction.
Additionally, solid top-line growth is anticipated, with sales for FY22 forecast to increase 78% and sales for FY23 estimated to increase 15% to a total of $50.56 billion. It is anticipated that UAL’s revenue will be higher in fiscal 2022 and FY23 than it was before the pandemic, which was $40.80 billion in 2019.
Valuation
UAL has a price-to-earnings ratio of 74.8X, and its shares are now selling for roughly $34. This is significantly greater than the 12.3X average seen in the sector. Despite this, UAL’s high value is swiftly finding a new equilibrium as a result of the company’s improved profitability. The current price of UAL is significantly lower than the all-time high of 747.2X that it reached earlier this year. When going ahead one year, UAL’s multiple of 7.3X is quite near to its median multiple of 8.8X over the past ten years.
Bottom Line
UAL presently has a Zacks Rank of #3, which indicates that investors should “Hold” their positions. At the same time, the Transportation-Airline Industry is currently ranked in the worst 32% of over 250 Zacks Industries. In spite of this, earnings have been on the upswing since the epidemic, and a strong performance in Q3 coupled with an optimistic forecast might help UAL stock start to take off.
Featured Image: Megapixl © Flynt
Author Ivy Palinlin 
