United Airlines(Nasdaq: UAL) The shares have increased by 148% in the past year, but that does not mean that it is still not a chance of great value. On the contrary, the stock still looks excellent and many trends are preferred.
Here are five reasons why United Airlines could be an excellent stock for your portfolio.
The airline went into excellent condition 2025. The company traveler is returning (the business income rose by 16 % years after year in the fourth quarter of 2024), with a remarkable improvement in the transatlantic market, where United held a strong position, and the Premium Traveler Market (Premium passenger income had risen 10 % on The same basis remains strong.
All this is good news for the profit margin, and the adjusted business profit margin of United was 10.7% in the fourth quarter of 2024 compared to 7.7% in the same period of 2023.
It is of particular importance that the international market will probably remain strong for a while, given Boeingand Airbus’ Challenges in supplying new aircraft in the broad body to airlines.
The continuous improvement of the end market demand and the price force of United is clear in its most important statistics: turnover per available seating mile (Rasm). It is an important number because it indicates how effective the price strategy of an airline is and how effectively it uses its capacity.
The good news is that the total Rasm growth of United became positive in the fourth quarter of 2024, with an increase of 1.6%, and Chief Commercial Officer Andrew Nocella said about the recent win call: “We are projecting that the domestic Rasm has solid will be positive in Q1. “
The domestic price environment improves unprofitable capacity with an increasing pace and accelerates the growth of business traffic as the underperformation of airlines. The sale of industry is less common at lower disconeration feet, because airlines give priority to profitability.
The Rasm improvements and comments confirm an improving operational environment.
Image source: Getty images.
Nocella’s point about airlines that remove unnecessary capacity emphasizes an interesting development that could make airlines more bastable in the long term.
The tree-and-bust cycles of the industry stem from the tendency of airlines to quickly expand capacity during flowering, but hesitate to reduce it during delays. The result is usually a slump in prices and profitability, because the airlines tend to have relatively high fixed costs.
The North -American aviation industry was particularly confronted with the conditions of overcapacity in the summer (a reason why aviation stocks sold in the summer). Nevertheless, it seems that a combination of more disciplined behavior and pressure on the cheap dragermarkt resulted in the capacity reduction that now helps the growth of rasm.
If this new discipline permanently proves, United Airlines and other leading aviation shares may be due to a valuation expense, since investors in the pencil in improved profitability in the longer term.
Image source: Getty images.
In addition to more disciplined behavior, the aviation industry distinguishes its earlier incarnation, because airlines such as United and Delta Diversity their income flows and customer relationships. Both airlines are no longer transport companies that offer one -off transactions with customers; They now have very successful loyalty programs that encourage repeated bookings. Lucrative co-branded credit cards bring substantive reimbursement for airlines when card owners use them.
The diversity of income streams helps protect against the disadvantage when the question starts to slow down. Again, this implies a chance of the valuation expansion.
Speaking of appreciation, the graph shows a stock trade with a low appreciation despite its considerable price increase in the past year.
UAL EV to EBITDA (forward) data from Ycharts.
One reason for this can be market prices in the aviation industry, which is usually cyclical. Yet, as explained, there are strong arguments why United Airlines is not as cyclical as before.
Another reason for the low valuation can be the considerable amounts of debts taken as a result of the Lockdown measures imposed during the COVID-19 Pandemie. However, united do have a substantial debt level of $ 28.7 billion, but it also has $ 8.8 billion in cash and equivalents and has generated more than $ 3 billion in free cash flow, with the management expected $ 3.4 billion in 2025. The debt statistics improve considerably.
All in all, United Airlines is a very attractive stock, and as long as the travel market remains floating, it will probably do well on the basis of the current price as a starting point.
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Lee Samaha has no position in one of the aforementioned shares. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.
5 reasons to buy United Airlines shares as if there are no tomorrow, was originally published by De Motley Fool
