Fueling Returns: UAL Stock And The Oil Price Opportunity

Airline stocks surged on June 16, with United Airlines (NASDAQ: UAL) leading the rally with a 6% increase, while Delta Air Lines and American Airlines each rose by 5%. The surge followed a drop in oil prices amid reports that Iran is aiming to ease tensions with Israel. However, the environment remains volatile due to ongoing geopolitical risks.

Fueling Returns: UAL Stock and the Oil Price Opportunity

Oil Price Volatility

The recent movement in oil prices has been significant. West Texas Intermediate (WTI) crude surged 20%, from $61 per barrel on May 30 to $73 on June 13, before settling slightly lower at $72. This jump was driven by escalating tensions in the Middle East, with Israel striking Iranian military and nuclear sites, prompting missile retaliation from Iran.
Reports indicating Iran’s intention to de-escalate have brought relief to oil markets and airline investors alike, who were concerned about prolonged high fuel costs. (A Battered Iran Signals It Wants to De-Escalate Hostilities With Israel and Negotiate, Summer Said, Benoit Faucon and Anat Peled, Updated June 16, 2025, The Wall Street Journal)

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Fuel Costs: A Critical Factor for Airlines

Oil price trends have a direct impact on airline earnings. For carriers like United Airlines, Delta, and American, fuel is the second-largest expense after labor, making up about 20% of total operating costs. This high exposure means that even small changes in fuel prices can have a material effect on profit margins in an industry already operating with thin margins and substantial debt.

The Investment Case For United Airlines

Among the major U.S. carriers, United Airlines offers the strongest investment proposition at current price levels. The stock trades at $77 per share, which is just 6.7 times its trailing twelve-month adjusted earnings of $11.64 per share. This is well below its three-year average P/E ratio of 9.4. For additional insights, see – United Airlines Valuation Ratios.
This valuation advantage is further supported by robust operational performance. United Airlines outpaces its peers on several key financial metrics:

3-year Average Revenue Growth:

• United Airlines: 29%
• Delta Air Lines: 23%
• American Airlines: 18%

Operating Cash Flow Margins:

• United Airlines: 18%
• Delta Air Lines: 13%
• American Airlines: 8%

Net Income Margins:

• United Airlines: 6.3%
• Delta Air Lines: 5.9%
• American Airlines: 1.3%

Outlook

United Airlines stands out as the most attractive investment among U.S. airline stocks due to its appealing valuation and stronger profitability. As oil prices stabilize and United’s operational advantages come into play, the stock offers a compelling opportunity for those seeking to benefit from a sector rebound.

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