Investing

Will United Airlines' Earnings Keep the Stock Soaring?

U.S. markets are closed Monday in observance of the Rev. Martin Luther King, Jr. holiday.

On Friday, US. markets closed higher on Friday, buoyed by a jump in consumer sentiment. The preliminary reading for January’s University of Michigan consumer sentiment index rose from 59.7 in December to 64.6, well above the economists’ forecast of 60.5. The Dow closed up 0.33%, the S&P 500 closed up 0.4%, and the Nasdaq Composite closed up 0.71%.

Taiwan-based United Microelectronics reported quarterly and full-year results this morning that were in line with expectations. The company said its capex budget for 2023 will rise from $2.7 billion last year to $3 billion.

There are no U.S.-traded companies scheduled to report quarterly results Tuesday morning, and just one notable report due after markets close Tuesday afternoon.

United Airlines

Over the past 12 months, shares of United Airlines Holdings Inc. (NASDAQ: UAL) have risen by about 7.2%, largely due to rising expectations for a solid earnings beat. For the first two weeks of January, Unite’s stock has gained 37% and nearly 39% since the company reported third-quarter results in mid-October. According to the U.S. Transportation Security Administration, passenger numbers have essentially risen to pre-pandemic levels. Couple that with higher fares, and it’s not difficult to see why airline stocks are generally having a good 2023. Even Southwest is up 10% for the year to date despite its recent self-inflicted mess.

Of 21 brokerages covering the airline, 12 have assigned the stock a Buy or Strong Buy rating, and 6 give the stock a Buy or Strong Buy rating. At Friday’s closing price of $51.65, the shares are trading slightly higher than the $51.00 median price target. At the high price target of $81.00, the upside potential is 56.8%.

The consensus fourth-quarter revenue forecast calls for sales of $12.24 billion, down 5% sequentially and up about 49.5% year over year. Analysts are forecasting adjusted EPS of $2.11 per share, up down nearly 25% sequentially and much better than the $1.60 per share loss in the year-ago quarter. For the full 2022 fiscal year, analysts expect EPS of $2.21, much improved over last year’s $13.94 per share loss. Revenue is forecast to rise by 81.8% to $44.8 billion.

United stock trades at a multiple of 23.4 times expected 2022 EPS, 8 times estimated 2023 earnings of $6.42, and  5.9 times estimated 2024 earnings of $8.80 per share. The stock’s 52-week range is $30.54 to $53.12, and United does not pay a dividend. Total shareholder return for the past 12 months was 7.2%.

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