Should You Buy United Airlines Stock Ahead Of Earnings?

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UAL: United Airlines Holdings logo
UAL
United Airlines Holdings

As the world grapples with another Covid surge, macroeconomic recovery has become a key concern for authorities leading to fewer restriction measures. The shares of United Airlines (NASDAQ: UAL) observed another round of sell-off after WHO declared the Omicron mutation as a variant of concern and investors were wary of a decline in passenger traffic. UAL stock has lost $10 billion in market capitalization – compared to the $4.2 billion operating cash burn since February 2020. Considering stable domestic demand even during these uncertain times, Trefis believes that the stock is poised for more gains. We highlight the quarterly trends in revenues, earnings, stock price, and expectations for Q4 2021 in an interactive dashboard analysis, United Airlines Earnings Preview.

United Airlines fundamentals improved in 2021 despite a raging pandemic

United Airlines revenues observed a 38% growth in 2021 assisted by passenger demand in the second and third quarters despite a raging pandemic. The company’s total capacity stood just 28% below 2019 levels and the consolidated load factor was 76% in the third quarter. The operating cash remained positive at $2.3 billion on revenues of $16 billion in the first nine months of 2021. Notably, the TSA checkpoint numbers stand 18% below pre-pandemic levels – hinting toward a gradual recovery in the coming months. (related: United Airlines Stock: Should You Buy The Dip?)

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How has UAL stock fared in comparison to the S&P 500?

UAL stock declined from levels of around $80 in February 2020 (pre-crisis peak) to levels of around $26 in March 2020 (as the markets bottomed out), implying UAL stock lost 67% from its approximate pre-crisis peak. Despite the multiple waves of the pandemic and an uncertain macroeconomic environment, the stock has gained 78% to reach $46 and we expect more room for growth given less stringent restriction measures imposed by governments.

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 Returns Jan 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 UAL Return 7% 7% -36%
 S&P 500 Return -2% -2% 108%
 Trefis MS Portfolio Return -7% -7% 264%

[1] Month-to-date and year-to-date as of 1/17/2022
[2] Cumulative total returns since the end of 2016

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