United Airlines UAL, a Chicago-based airline heavyweight, looks highly attractive from a valuation standpoint. With a forward price-to-sales (P/S) ratio of 0.51, UAL stock trades at a significant discount to industry levels, the S&P 500, and rival Delta Air Lines DAL. 

UAL’s P/S F12M Vs. Industry, S&P 500 & DAL

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UAL has a Value Score of A.

Now, the question is whether it is worth buying the stock at current prices. Let us delve deeper to find out.

UAL Stock Likely to Fly High Throughout 2025

The stronger-than-expected recovery in air travel demand following the pandemic has been supporting the growth of airline stocks like United Airlines. While air travel demand is particularly strong on the leisure front, it is heartening to note that business demand has made an impressive comeback.

UAL's strategic focus on international markets and retention of aircraft and pilots during COVID-19 have driven its rapid growth. The company’s strong focus on international markets has paid rich dividends as few foreign airlines were able to return capacity to the market as quickly as UAL did. 

United Airlines had a busy summer in 2024, carrying a record 48 million passengers. It saw a travel surge in winter as well, led by increased travel to Europe. This indicates that Americans are more inclined to spend their money during holidays on experiences instead of physical gifts. To cater to the surge in holiday demand, UAL offered nearly 60 nonstop flights each day from its hubs in the United States to Europe in November and December.

With air travel demand expected to remain healthy, UAL stock should continue to perform well. UAL’s expansion strategy, coupled with its focus on premium demand, serves it well and positions it to capture a larger slice of the recovering travel market. The sharp reduction in airline seats in the domestic market, which has driven up ticket prices, is serving UAL well.  

As a result, analysts have seemingly turned optimistic about the stock and upwardly revised earnings estimates over the past month.

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UAL’s Strong Price Performance

Mainly driven by upbeat air travel demand, shares of UAL have performed well in the past year. Shares have outperformed the Zacks Transportation - Airline industry, fellow industry player American Airlines AAL and the S&P 500 Index over the same timeframe.

One-Year Price Comparison

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UAL’s Liquidity & Buyback Program Lift Confidence

UAL’s balance sheet further underscores its strength. With $17.4 billion in total liquidity as of Dec. 31, 2024, including $14.7 billion in cash, the company is well-equipped to weather macroeconomic challenges.

Investor-friendly initiatives add another layer of appeal. In October, UAL announced a $1.5 billion share buyback plan, highlighting its pro-shareholder approach. This was the company's first buyback program since suspending share repurchases during the COVID-19 pandemic. More than $1.4 billion remained in authorization as of Dec. 31, 2024.

Should You Buy UAL Stock Now?

High labor costs (expenses on salaries and related costs were up 12.8% in 2024) and a very large but aging fleet raise concerns. Delivery delays, predominantly of the 737MAX, due to production issues at Boeing BA hampered UAL’s fleet-related plans. For 2025, UAL expects to receive approximately 40 Boeing 737MAX jets. It also expects to receive other jets to modernize its fleet. This will require substantial capex (expected to be less than $7 billion in 2025).

We believe UAL is well-positioned to dodge the challenges.  Upbeat air travel demand and shareholder-friendly initiatives are supporting growth. UAL’s valuation adds to the layer of positives. Donald Trump's re-election is a positive for the airline industry and expected to lead to a return to the pro-business stance that characterized his first term.  The Wall Street average target price of $134.53 for UAL stock suggests an upside of more than 37% from current levels

With a mix of value, growth potential and resilience, UAL stock is a compelling addition to any portfolio. The stock sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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