United Airlines UAL is gaining from an uptick in air-travel demand (particularly on the leisure front). The upsurge in passenger volumes makes the UAL stock an interesting investment opportunity.
Let’s delve deep to unearth the factors working in favor of the Zacks Rank #1 (Strong Buy) stock.
Northward Earnings Estimates: The Zacks Consensus Estimate for current-quarter and current-year earnings have been revised 49.8% and 8.5% upward, over the past 60 days, respectively. Such favorable estimate revisions reflect brokers’ confidence in the stock.
Given the wealth of information at the brokers’ disposal, it is in the best interest of investors to be guided by their expert advice and the direction of their estimate revisions. This is because it serves as a key indicator in determining the price of a stock.
Upbeat Air-travel Demand: United Airlines is seeing a steady recovery in domestic and international air-travel demand. Owing to robust air-travel demand, United Airlines posted a significant year-over-year increase (51.1%) in first-quarter 2023 revenues. The massive year-over-year improvement in the top line was driven by a 61.8% rise in passenger revenues (accounting for 89.8% of the top line) to $10,274 million.
Owing to strong air-travel demand, UAL expects revenues for the June quarter to grow 14-16% year over year. Management expects second-quarter earnings per share in the $3.50-$4.00 band.
Impressive Price Performance: Driven by the rosy air-travel demand scenario, shares of UAL have increased 18% year to date compared with its industry’s appreciation of 5.5%.
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Bullish Industry Rank: The industry, to which UAL belongs, currently has a Zacks Industry Rank of 35 (of 250 plus groups). Such a solid rank places the company in the top 14% of the Zacks industries. Studies show that 50% of a stock price movement is directly tied to the performance of the industry group that it hails from.
In fact, an ordinary stock in a strong group is likely to outperform a robust stock in a weak industry. Therefore, taking the industry’s performance into consideration becomes imperative.
Other Stocks to Consider
Investors interested in the Zacks Airline industry may also consider stocks like American Airlines AAL and Alaska Air Group ALK, each carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Airlines is benefiting from the improved air-travel-demand situation. In the first quarter of 2023, AAL’s operating revenues of $12,189 million increased 37% year over year.
AAL expects system capacity for the June quarter to increase 3.5-5.5% from the figure reported in second-quarter 2022. The Zacks Consensus Estimate for AAL’s current-year earnings has been revised upward by 15.3% in the past 60 days.
On the back of upbeat air-travel demand and favorable pricing, Alaska Air's top line increased 31% year over year in the March quarter. The company expects to boost its fleet and workforce in 2023 to meet the anticipated high demand.
ALK expects second-quarter 2023 total revenues to increase 2.5-5.5% from the second-quarter 2022 actuals. The Zacks Consensus Estimate for Alaska Air's current-year earnings has been revised upward by 6.9% in the past 60 days.
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