Bernstein maintains United stock Outperform with $115 target

On Wednesday, Bernstein analysts maintained a positive outlook on United Continental (NASDAQ:UAL) shares, reiterating an Outperform rating with a price target of $115.00. The airline's performance in the fourth quarter of 2024 was highlighted as a strong finish to the year and a promising setup for 2025. United reported an adjusted diluted earnings per share (EPS) of $3.26, surpassing consensus estimates by 7% and Bernstein's forecast by 5%. According to InvestingPro data, the company's trailing twelve-month EPS stands at $8.30, with analysts forecasting $10.44 for fiscal 2024, indicating continued earnings momentum.

United Continental's revenue for the quarter exceeded expectations across all categories, including passenger, cargo, and other operating revenues. Notably, cargo revenue saw a significant 20% increase compared to street expectations, which some have attributed to activity in the Asia-Pacific region. Despite concerns about fuel costs, the company has provided guidance that suggests improvement in the first quarter of 2025. With a current P/E ratio of ~13x and revenue growth of 6.7% in the last twelve months, InvestingPro analysis suggests the stock is currently trading near its Fair Value. InvestingPro subscribers have access to 12 additional key insights about UAL's valuation and growth prospects.

The airline also reported growth in its Basic Economy revenue, up 20% year-over-year (YoY), and a 6% revenue increase in domestic flights. However, this growth came amid a weaker domestic load factor and passenger revenue per available seat mile (PRASM), which were down 1.6 percentage points and 1.9% YoY, respectively. These figures indicate potential areas for domestic performance enhancement as the new year progresses.

Bernstein's commentary points out that the airline industry's efforts to manage capacity are yielding positive results, but the market has yet to fully recognize these improvements in valuation. The firm believes that United Continental's recent results bolster the bullish case for legacy airlines and merit the maintained Outperform rating and price target.

In other recent news, United Airlines recently outperformed Wall Street expectations with a strong earnings report for the fourth quarter, posting earnings per share (EPS) of $3.26, $0.33 higher than the analyst consensus. The company's revenue for the quarter also exceeded expectations, coming in at $14.7 billion. These results, along with the company's projected adjusted profit range of $11.50 to $13.50 per share for the full-year 2025, have boosted investor sentiment.

United Airlines has also seen changes in its board of directors, with Brian Noyes replacing Captain Anne Worster. This change was not due to any disagreements with the company regarding its operations, policies, or practices. In addition, United Airlines has made significant updates to its bylaws, further aligning the company's governance practices with current Delaware law and best practices.

TD Cowen analysts have raised their price target for United Airlines shares, maintaining a Buy rating. They anticipate an adjusted earnings per share (EPS) of $2.99 for the fourth quarter, slightly above the Bloomberg consensus of $2.95. These expectations are bolstered by strong international demand and positive domestic supply dynamics.

Lastly, the airline industry is expected to benefit from a 20% drop in Brent crude oil prices, potentially leading to a net profit of $31.5 billion in 2024. This could be favorable for United Airlines, given the industry's surge in demand in the air cargo market. These are among the recent developments for United Airlines.

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