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Here's Why You Should Retain United Airlines (UAL) Stock Now

United Airlines Holdings, Inc. UAL is being aided by buoyant air-travel demand and its goal of achieving net-zero emissions by 2050. However, low liquidity is worrisome.

Factors Favoring UAL

Owing to robust air-travel demand, United Airlines posted a significant year-over-year increase (about 51.1%) in first-quarter 2023 revenues. Passenger revenues (accounting for 89.8% of the top line) of $10,274 million, up 61.8%, resulted in this uptick.

Driven by the rosy scenario with respect to air-travel demand, UAL expects revenues for the June quarter to grow 14-16% year over year.  It projects second-quarter earnings per share in the $3.50-$4.00 band. For full-year 2023, UAL expects earnings per share to be between $10 and $12.

In line with its goal of achieving net-zero emissions by 2050 without relying on traditional carbon offsets, United Airlines operated the first ever commercial flight using 100% sustainable aviation fuel in one of its two engines. The fuel was supplied by World Energy, North America's only commercial biofuel producer.

Key Risks

A decline in current ratio (a measure of liquidity) does not bode well for the company. The carrier exited first-quarter 2023 with a current ratio of 0.91, down from the reading of 1 in fourth-quarter 2022. Reduction in this key ratio generally implies that the company's ability to generate cash is on the decline.

Zacks Rank & Key Picks

Currently, UAL carries a Zacks Rank #3 (Hold).

Some better-ranked stocks for investors interested in the Zacks Transportation sector is Copa Holdings, S.A. CPA and Allegiant Travel Company ALGT.

Copa Holdings, which presently sports a Zacks Rank #1 (Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive.  You can see the complete list of today’s Zacks #1 Rank stocks here.

For second-quarter and full-year 2023, CPA’s earnings are expected to register 765.6% and 75.4% growth, respectively, on a year-over-year basis.

Allegiant, currently sporting a Zacks Rank #1, also benefits from buoyant air-travel demand. With air-travel demand rising in the United States, operating revenues improved 8.5% year over year in 2022.

Management expects revenues to remain strong in 2023 as well. In first-quarter 2023, operating revenues increased 29.9% on a year-over-year basis. For second-quarter and full-year 2023, ALGT’s earnings are estimated to rise 364.5% and 192%, respectively, on a year-over-year basis.

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