Investing.com -- Raymond James downgraded United Airlines from Outperform to Market Perform on Wednesday, citing concerns over potential weakness in long-haul international travel demand.

In a note to clients, Raymond James analysts acknowledged that “premium and long-haul international demand remain solid” but warned of “greater earnings risk if these segments start to falter.” 

The firm removed its target price for UAL, reflecting earnings cuts and the application of lower valuation multiples due to “elevated macro uncertainty.”

Raymond James’ revised estimates factor in a “loss of corporate demand momentum and added weakness in off-peak leisure travel,” which the firm believes will result in lower average fares across the industry. 

However, it sees a “greater mix shift pressure at airlines with greater business travel revenue,” such as United.

The downgrade comes amid broader concerns for the airline industry. The firm expects U.S. airlines to “cut 2025 EPS guidance out of an abundance of caution,” given the uncertainty surrounding travel demand. 

It also pointed to signs of weakening inbound U.S. travel, with Air Canada (TSX:AC) reporting a “~10% decline in industry bookings in the Transborder market over April-September” and Accor (EPA:ACCP) noting that “forward summer bookings from Europe are down ~25%.”

Despite these headwinds, Raymond James noted that U.S. outbound demand so far remains resilient, which is particularly important for United and Delta, given their exposure to international travel. The firm now favors Delta, which it rates as a Strong Buy.

While United’s recent stock pullback may have been an overreaction, Raymond James ultimately sees “better risk-reward elsewhere” in the sector.

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