After it rose by more than 135% in 2024, it's understandable if investors feel it's time for United Airlines (UAL +4.11%) stock to take a breather. That said, stock price charts have no memory, and the best gauge of value is based on earnings and future earnings potential rather than on the shape of a chart.
In this context, it's definitely not too late to buy United Airlines stock. Here's why.
United Airlines is flying in 2025
With United's rival Delta Air Lines having already reported on its fourth quarter of 2024, there's an opportunity for a read-across for United Airlines, and doing so makes good reading. Delta's management confirmed that "carriers are taking action to improve their financial health, creating an increasingly constructive backdrop" on the earnings call.
NASDAQ: UAL
Key Data Points
That's big news for United and other premium carriers, because it implies that airlines continue to act in a disciplined manner when faced with overcapacity -- that's good news for pricing power. Similarly, Delta's management commentary for the second quarter noted that "Demand across the Atlantic is benefiting from strong U.S. point of sale and an extension of the season with unprecedented off-peak results." Transatlantic flight is a notable area of strength for United Airlines.
Delta's management said that "we saw an acceleration in air travel demand from corporates and consumers and co-brand card spending growth accelerated," which it sees continuing into the March quarter. Again, the read-across is excellent for United Airlines, because it also focuses on higher-margin corporate travelers.
Image source: Getty Images.
A great value stock
If the read-across is accurate, then there's probably some upside potential in Wall Street analysts' current expectations for 2025. The analyst consensus has earnings per share (EPS) of $10.34 for 2024 and $12.72 for 2025, implying 23.3% growth and a forward price-to-earnings ratio of 8.2 times 2025 earnings. That's cheap enough, but throw in some upside potential to those earnings, and it gets even better.
