By Teresa Rivas

United Airlines Holdings' first-quarter report showed that any numbers are better than no numbers at all.

Tariff chaos has caused consumers and corporations to pull back sharply. With uncertainty so high, everyone is in a wait-and-see mode, and multiple companies warned that would impact profits. Investors were particularly concerned about airlines after Delta Air Lines, which had already warned of trouble last month, pulled its full-year guidance on April 9, saying that "growth has largely stalled" due to trade war worries.

By contrast, United, rather than retracting its outlook, offered two forecasts: one for a world in which the tariff situation stabilizes and another that handicaps a recession. The company reiterated its guidance for earnings per share between $11.50 and $13.50 for the former scenario, and a range of $7 to $9 for the latter. The stock recently closed at $66.99.

Doing so "has provided the market with a reasonable framework on the downside scenario in the event of a recession as well as an upside case should the economy come out of this period relatively unscathed (a less likely scenario, in our view)," writes UBS analyst Thomas Wadewitz.

The market seemed to appreciate having a range, regardless of how wide, sending shares higher on Wednesday. Given that at the start of the month, before the tariff pause, BofA Securities estimated that the hit to the S&P 500's EPS could range from 5% to 35%, given all the known unknowns and unknown unknowns, investors are used to dealing with a range of profitability outcomes.

"The market has been guardrail to guardrail on this stock, and it looks like expected outcomes are bullish to what the buy side was expecting at $9 to $10 for the year," notes Bernstein analyst David Vernon.

Of course, there's only so much the company can control for. It's removing some domestic capacity, but the macroeconomic backdrop will determine demand. United itself said it's "impossible to predict this year with any degree of confidence."

Nonetheless, the overall tone of the report was less dire than Delta's, with some encouraging points, including the fact that it saw stabilizing demand over the past six weeks. TD Cowen analyst Tom Fitzgerald writes that he is "impressed by the ongoing improvements the company has achieved," including first-quarter results that put it closer to pre-Covid profit levels and free cash flow of $2.3 billion, up some 50% year over year.

United's actual first-quarter top- and bottom-line results came in ahead of expectations, although that doesn't matter as much this earnings season, when investors are focused on forecasts as they scramble for any visibility amid tariff upheaval.

That said, United -- which soared last year, outperforming most of the Magnificent Seven Big Tech stocks -- still just might be the best of a bad bunch for now. Airlines in general are once again in the doghouse. Before tariffs threw a wrench in the humming global economy, analysts were predicting blue skies for the industry thanks to ongoing demand and strong pricing. Now the industry that can't catch a break looks particularly vulnerable to a downturn.

So much for friendly skies.

Write to Teresa Rivas at teresa.rivas@barrons.com

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April 17, 2025 02:30 ET (06:30 GMT)

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