United Airlines Holdings (UAL 5.31%) beat expectations for the fourth quarter and provided an upbeat outlook for 2024. Investors reacted with a cheer, sending United shares up 10.1% at the open on Tuesday. They remained up nearly 7% as of 1:30 p.m. ET on Tuesday.
Record performance in an uncertain time
Airline investors have gone on a wild ride in recent years. The pandemic ground travel to a near halt, but consumers have rushed to airports since the great reopening, determined to make up for lost time. United and other airlines saw record volumes in 2022 and 2023.
The question now is what happens from here. Much of that pandemic-era pent-up demand is extinguished, and investors are worrying that a combination of rising inflation and economic uncertainty will eat into demand.
United’s latest results provide no reason for concern. The airline earned $2 per share in the fourth quarter on revenue of $13.6 billion, surpassing Wall Street expectations for $1.70 per share in earnings on sales of $13.54 billion.
“Despite unpredictable headwinds, we delivered on our ambitious EPS [earnings-per-share] target that few thought possible — and set new operational records for our customers,” United CEO Scott Kirby said. “Looking ahead, we expect these trends to continue and United is incredibly well positioned to capitalize on them and to deliver on our short- and long-term financial targets.”
Investors were particularly excited about the airline’s outlook for 2024. United expects adjusted earnings to come in at between $9 and $11 per share. The midpoint of that range is above the $9.45 per share average analyst forecast.
Is United Airlines stock a buy after strong quarterly results?
The year is likely to start off with turbulence. United is one of the airlines impacted by Boeing‘s 737 MAX issue and will be dealing with grounded aircraft for some time. The airline expects to report a first-quarter loss of between $0.35 and $0.85 per share but sees things improving as the year goes on.
United’s optimism in the face of airline issues, rising labor costs, and continued economic uncertainty is noticeable, compared to rival Delta Air Lines‘ more somber message last week. Delta backed away from its previous 2024 profit guidance due to the uncertainty.
United, which for years was an underperformer in the industry, has done an impressive job restructuring under Kirby and is set up well for the long haul. For those interested in airline investing, United is an intriguing option to consider.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.
