To The Moon

$United Continental(UAL)$ is expected to post its quarterly earnings for fiscal Q1 2025 on 15 April 2025 after the market close.

The consensus estimate for revenues are expected to come in at $13.49 billion, which is up 7.6% from the year-ago quarter. The consensus estimate for the earnings per share is anticipated to be 74 cents which would be a significant increase of +626.7% compared to the same period last year.

United Airlines (UAL) Last Positive Earnings Call Saw Decline Of 40.64% In Price

UAL had a positive earnings call on 21 Jan 2025 which saw its share price dropped by 40.64% since.

United Airlines reported strong financial performance for 2024, with record profit sharing and operational achievements. International revenue and capacity growth were significant, with plans for EPS growth and strong free cash flow in 2025. However, challenges with FAA staffing and OEM production delays remain areas of concern.

United Airlines (UAL) Guidance On Travel Demand Trend

In the United Airlines Q4 2024 earnings call, the company provided robust guidance for 2025, anticipating an 18% increase in EPS at the midpoint, which translates to $11.50 to $13.50. This growth is supported by an expected 3.5-point improvement in pretax margin for Q1 2025, driven by strong operational performance and strategic adjustments in network capacity. The company also outlined plans to maintain cost efficiency, with a particular focus on managing labor and inflationary pressures, which are expected to add 2 to 3 points in CASM-ex pressure due to pending labor agreements. Additionally, the airline highlighted its continued investment in product differentiation, including the rollout of Starlink Wi-Fi, which is seen as a competitive advantage.

United plans to leverage its MileagePlus program further to enhance revenue and customer experience, indicating a strong commitment to decommoditizing air travel and sustaining profitability amidst a challenging macroeconomic environment.

Key Factors Influencing UAL Q1 2025 Earnings

United Airlines will be paying out $713 million in profit sharing for 2024, signifying strong financial performance and employee involvement.

Travel Demand Trends

Leisure vs. Business Travel: Leisure travel demand has rebounded post-pandemic, but business travel recovery remains gradual. By 2025, corporate travel budgets and hybrid work trends will shape UAL’s premium cabin and transatlantic/transpacific route performance.

International Demand: UAL’s extensive international network (a key differentiator) could benefit if Asia-Pacific travel (e.g., China, Japan) normalizes post-pandemic restrictions and geopolitical tensions ease.

United's international capacity, particularly in the Pacific and Atlantic regions, showed significant growth with margins above domestic averages.

Fuel Costs

Jet Fuel Prices: A major expense (~30% of operating costs). Volatility in oil prices (influenced by OPEC+ decisions, geopolitical conflicts, or renewable energy shifts) will directly impact margins. Hedging strategies could mitigate some risk.

Capacity and Load Factors

Seat Capacity: UAL’s planned capacity growth (e.g., expanding Pacific routes in 2024) must align with demand to avoid oversupply. Load factors (seat occupancy) above 80% are critical for profitability.

United served a record 174 million customers in 2024, with the busiest December in history, averaging 511,000 passengers a day.

Fleet Modernization: New fuel-efficient aircraft (e.g., Boeing 787s, Airbus A321neos) may lower per-seat costs and improve margins.

Labor and Operational Costs

Union Contracts: Rising wages (e.g., pilot agreements in 2023–2024) could pressure expenses. Strikes or staffing shortages (e.g., air traffic control) might disrupt operations.

66% of United's delays were attributed to ATC challenges and staffing issues, highlighting ongoing operational hurdles.

Ancillary Revenue: Baggage fees, premium seating, and loyalty programs (e.g., MileagePlus partnerships) are key profit drivers. UAL’s focus on upselling will be scrutinized.

United expects fewer narrow-body aircraft deliveries in 2025 due to OEM delays, impacting capacity growth plans.

Debt and Financial Health

Balance Sheet Management: UAL’s ability to reduce pandemic-era debt (over $30B in 2023) and refinance at favorable rates will affect interest expenses and liquidity.

United plans to grow its EPS by approximately 18% in 2025 and expects to generate around $3.4 billion in free cash flow, matching 2024's performance.

In 2024, United paid down $7.4 billion of debt, reducing net leverage to 2.4x, with a target to go below 2x in 2025.

Macroeconomic Risks

Recession Fears: A downturn could suppress travel spending. UAL’s reliance on U.S. consumers (who prioritize travel in inflationary environments) may offset some risk.

Currency Fluctuations: A strong U.S. dollar could dampen international revenue.

United Airlines (UAL) Price Target

Based on 15 Wall Street analysts offering 12 month price targets for United Airlines Holdings in the last 3 months. The average price target is $108.93 with a high forecast of $150.00 and a low forecast of $59.00. The average price target represents a 66.05% change from the last price of $65.60.

If we were to look at how UAL price target would move, this would depends on how its passenger revenue per available seat mile (PRASM) trends which will indicate pricing power and demand health.

Also the cost control effort on the non-fuel CASM (cost per available seat mile) must stabilize despite wage inflation. This could be derail by the recent tariffs turbulence, which would provide these risks to UAL.

• Fuel Price Spikes: Unhedged exposure to oil markets could erase earnings gains.

• Operational Disruptions: Weather, IT failures, or labor strikes may harm reputation and costs.

• Competitive Pressure: Low-cost carriers (e.g., Southwest) and rivals (Delta, American) may undercut pricing on key routes.

How UAL could navigate this would very much see how UAL would move to the higher end of the price target.

Technical Analysis - Exponential Moving Average (EMA)

If we looked at the technical, the bulls are still trying to make a daily uptrend, though not successful, but the earnings surprise could assist to make it happen.

I think we need to look at UAL strategic initiatives if UAL were to able make a surprise price move, here are some of the factors I would consider.

• Network Expansion: Focus on underserved international routes (e.g., Manila, Dubai) and hubs (Denver, Newark) to capture premium demand.

• Sustainability Investments: Commitments to sustainable aviation fuel (SAF) and carbon neutrality goals may align with regulatory trends but raise short-term costs.

• Partnerships: Alliances (Star Alliance) and joint ventures (e.g., Atlantic Joint Venture with Lufthansa) enhance global reach and loyalty program value.

I might want to see how things unfold on the sectoral tariffs to see if that would benefit UAL or cause pressure to UAL.

Summary

United Airlines’ Q1 2025 earnings will hinge on these following factors

1. International Travel Recovery: Success in capturing post-pandemic demand in Asia and Europe.

2. Cost Discipline: Managing labor and fuel expenses while modernizing fleets.

3. Premium Revenue Growth: Upselling premium cabins and leveraging loyalty programs.

4. Macro Stability: Avoiding recessionary pressures and oil market shocks.

By 2025, UAL’s strategic bets on global networks and operational efficiency could position it as a leader in full-service aviation. Investors should watch for updates on debt reduction, international load factors, and management’s guidance on achieving long-term profitability targets. If travel demand remains resilient and execution aligns with strategy, UAL could outperform in a challenging industry landscape.

With the tariff turbulence and a recessionary pressure uncertainty, we might see UAL navigating a challenging industry.

Appreciate if you could share your thoughts in the comment section whether you think UAL could navigate through the recessionary pressure amid tariff turbulence.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.