On Wednesday, Evercore ISI updated its financial outlook for United Continental (NASDAQ: UAL), increasing the stock’s price target to $85 from the previous $65 while maintaining an Outperform rating. The firm’s analyst cited a strong market reaction to United’s third-quarter performance and positive future outlook as key reasons for the adjustment.
United Continental’s stock has been observed to garner significant interest following its third-quarter earnings beat, share buyback announcement, and optimistic forward-looking statements. The analyst noted that the airline industry, particularly United Continental, is attracting attention from investors who are currently interested in cyclical and ‘soft-landing’ investment opportunities.
The industry has seen a notable shift, with airlines trading at lower valuations compared to pre-pandemic levels, which suggests that the market has been pricing in cycle risk unevenly. This under-ownership in the sector, coupled with United Continental’s recent positive developments, suggests potential for sustained investor interest.
Evercore ISI has revised its earnings per share (EPS) estimates for United Continental for the years 2024 and 2025. The new EPS forecasts are set at $10.33 and $12.00, up from the previous estimates of $9.76 and $10.80, respectively. This revision reflects a more optimistic assessment of the airline’s financial prospects in the coming years.
The firm’s analyst believes that the airline’s current trajectory and the broader industry context could lead to a continued increase in the stock’s value. The new price target of $85 represents a significant increase from the prior target, indicating a positive outlook on the company’s share performance.
In other recent news, United Airlines has been the focus of several updates from financial analysts. Deutsche Bank recently raised its price target for United, maintaining a Buy rating, following the airline’s better-than-expected third-quarter earnings per share of $3.33. This comes despite significant operational challenges, including an estimated $100 million negative impact due to flight cancellations. Barclays also raised its price target for United, keeping an Overweight rating, citing lower fuel costs and robust domestic growth as key factors.
United Airlines has not only surpassed earnings expectations but also announced a new $1.5 billion share repurchase program. This move, the first of its kind since the onset of the COVID-19 pandemic, represents about 7% of the company’s market cap and signals its confidence in its financial health. The airline has also projected a stronger profit for the current quarter, with an adjusted profit expectation ranging from $2.50 to $3 per share, surpassing the average analyst forecast.
Furthermore, United Airlines has announced a significant expansion of its international flight schedule for summer 2025, including eight new destinations. However, due to escalating tensions in the Middle East, the airline has had to adjust its flight schedules, affecting services to and within the region.
InvestingPro Insights
Recent data from InvestingPro aligns with Evercore ISI’s bullish outlook on United Continental (UAL). The company’s P/E ratio of 8.16, which is even lower at 6.67 when adjusted for the last twelve months, suggests that UAL is trading at a relatively low earnings multiple. This valuation metric supports the analyst’s view that the airline industry is currently undervalued compared to pre-pandemic levels.
InvestingPro Tips highlight that UAL has seen significant returns over various time frames, with a 62.03% return over the past year and a 54.34% return in the last six months. These strong performance indicators align with the analyst’s observation of increased investor interest in the stock following its Q3 earnings beat and positive outlook.
Furthermore, an InvestingPro Tip notes that 9 analysts have revised their earnings upwards for the upcoming period, which corroborates Evercore ISI’s decision to raise EPS estimates for 2024 and 2025. This consensus among analysts suggests growing confidence in UAL’s financial prospects.
For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for UAL, providing a deeper understanding of the company’s financial health and market position.
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