United Airlines UAL is scheduled to report first-quarter 2025 results on April 15, after market close.

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The Zacks Consensus Estimate for first-quarter 2025 earnings, currently pegged at 79 cents per share, has been revised 23.3% downward in the past 60 days. In the year-ago quarter, UAL had reported a loss of 15 cents per share.

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The Zacks Consensus Estimate for first-quarter 2025 revenues is currently pegged at $13.5 billion, implying a 7.6% increase from first-quarter 2024 actuals.

UAL has an impressive earnings surprise history, as reflected in the chart below.

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Q1 Earnings Whispers for UAL

Our proven model does not predict an earnings beat for UAL this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat, which is not the case here.

The company's Earnings ESP is -5.77%. This is because the Most Accurate Estimate currently stands at 75 cents per share, 4 cents below the Zacks Consensus Estimate. UAL currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Given this backdrop, let us examine the factors that might have influenced United Airlines’ performance in the to-be-reported quarter.

We expect tariff-induced economic uncertainties and the resultant reduction in consumer and corporate confidence to have caused a slowdown in domestic air travel demand. However, with the demand for long-haul travel remaining buoyant, international passenger revenues are likely to have been impressive. United Airlines’ strong presence in international markets is likely to have boosted international passenger revenues. The metric is likely to increase 14.4% year over year, as per our model.

Labor costs are also likely to have been high, hurting bottom-line performance in the March quarter. We expect salaries and related costs to increase 12.9% in the to-be-reported quarter from the first quarter of 2024 actuals.

On a brighter note, low fuel costs due to the downtrend in oil prices are likely to have boosted the bottom-line performance. The southward movement of oil prices bodes well for UAL's bottom-line growth because fuel expenses are a significant input cost for the airline space.

UAL Price Performance & Stock Valuation

Due to the slowdown in domestic air travel demand, airline stocks have performed dismally in the January-March period. United Airlines and other key players in the Zacks Transportation - Airline industry, such as Delta Air Lines DAL and American Airlines AAL, declined in double digits in the three-month period. Shares of United Airlines, Delta Air Lines and American Airlines plunged 28.9%, 28% and 39.5%, respectively.

Q1 Price Comparison

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From a valuation perspective, United Airlines is trading cheaper than the industry. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.36X, lower than the industry average of 0.53X. The company has a Value Score of A. Fellow airline operator American Airlines is trading even cheaper. Delta Air Lines is a tad more expensive than UAL. While United Airlines is trading at a forward sales multiple of 0.36X, American Airlines and Delta Air Lines are trading at 0.12X and 0.44X, respectively.

UAL’s P/S F12M Vs. Industry, DAL & AAL

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Investment Thesis for UAL

Even though air travel demand has improved from the pandemic low, the recent slowdown in the same, particularly on the domestic front, is a concern. The tariff-induced economic uncertainty is unlikely to fade away soon and is likely to weigh further on passenger revenues. 

High labor costs are a concern too and are likely to have hurt the bottom line. However, United Airlines’ shareholder-friendly stance is a positive. In October 2024, UAL’s management announced a $1.5 billion share buyback plan. This was the first buyback program since the pandemic. The new buyback program highlights UAL’s financial progress. UAL aims to continue executing this plan through 2025. This program will be funded by free cash flow generation.

Final Thoughts 

Despite low fuel costs, UAL is likely to have recorded an unimpressive first-quarter performance due to low passenger revenues, mainly on the domestic front.

Given this backdrop, we can safely conclude that investors should refrain from rushing to buy UAL stock ahead of its earnings release on April 15. Instead, they should monitor the developments pertaining to the stock closely for a more appropriate entry point, as an erroneous and hasty decision could affect portfolio gains. UAL’s current Zacks Rank supports our thesis.

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Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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