United-UAL's Q1 Earnings Coming Up: Time to Buy, Sell or Hold the Stock?

Core Viewpoint - United Airlines (UAL) is expected to report first-quarter 2025 results on April 15, with a consensus estimate of earnings at 79 cents per share, reflecting a 23.3% downward revision over the past 60 days [1][2]. Financial Performance - The Zacks Consensus Estimate for first-quarter 2025 revenues is $13.5 billion, indicating a 7.6% increase from the same quarter in 2024 [2][3]. - UAL's earnings surprise history is notable, but the current model does not predict an earnings beat for this quarter, with an Earnings ESP of -5.77% [4][5]. Market Conditions - Domestic air travel demand has slowed due to tariff-induced economic uncertainties, while international passenger revenues are expected to increase by 14.4% year-over-year [6]. - Labor costs are projected to rise by 12.9% compared to the first quarter of 2024, which may negatively impact UAL's bottom line [7]. Stock Performance - UAL's stock, along with other major airlines, has seen significant declines in the January-March period, with UAL shares dropping by 28.9% [8]. - In terms of valuation, UAL is trading at a forward sales multiple of 0.36X, lower than the industry average of 0.53X, indicating a cheaper valuation compared to peers [11]. Investment Considerations - Despite improvements in air travel demand post-pandemic, the recent slowdown, particularly in domestic travel, raises concerns for UAL's passenger revenues [14]. - UAL has announced a$ 1.5 billion share buyback plan, the first since the pandemic, which reflects financial progress and aims to be funded by free cash flow generation [15]. - Overall, UAL is likely to report an unimpressive first-quarter performance due to low passenger revenues, especially domestically [16].