United Airlines Is in Reversal—If the Economy Doesn’t Stall

Key Points

• United Airlines had a solid Q1 and expects strength to continue in Q2. 
• The key risk lies in Spotify’s full-year guidance, which is highly sensitive to the broader economic outlook—if the economy stalls, the company’s results could significantly weaken.
• Analysts have reset their price targets but see this market rising 50% from April lows by year's end. 

The United Airlines NASDAQ: UAL stock price action is in a trend reversal after selling off to ultra-deep levels, and the company outperformed in Q1. The critical takeaways are that the United Next plan is working, the business is gaining traction, and the company outperforms its competitors in the core, main cabin category, driving record revenues and historically high operational quality. 

Another critical detail is the guidance, but investors are cautioned because it is a choose-your-own-adventure based on economic conditions. On the one hand, the company expects capacity gains, increased revenue per seat mile, and lower fuel costs to drive significant outperformance in 2025.

That’s if the economy doesn’t stall.

On the other hand, if the economy stalls, earnings will fall short of the consensus but remain sufficient to sustain the business's financial health.

Regarding the stock price action, the market for UAL stock reached a low in early April, about 50% below the recently set high. The low was driven by tariff-induced fears that have since subsided. While tariffs remain a threat, the impact has been diminished and delayed, suggesting no economic stall until the 2nd half of the year or later. 

Since hitting the low, the price action aligns with bottoming, specifically a Head & Shoulders Bottom, which the post-release action confirms. The opportunity now requires patience, waiting for the pattern to be completed and timing the appropriate entries. 

United Airlines Stock Advances on Record Results, Optimistic Guidance

United Airlines posted a solid Q1, with revenue growing by 5.3% on strength in all reporting metrics. The revenue outpaced MarketBeat’s reported consensus due to a 4.9% increase in capacity, compounded by a 0.5% rise in total revenue per seat mile, aided by growth in all segments. Premium revenue grew by 9.2%, business by 7.4%, and international by more than 5%, but the story is in the main cabin. 

The company grew its Basic revenue by 7.6% compared to a slight decline for Delta Air Lines NYSE: DAL. Cargo and loyalty were also solid performers, growing by 9.4% and 9.2%, respectively.

Margin is another area of strength. The company widened its margin, primarily on fuel cost declines, to post a profit compared to last year’s losses. The company’s net income came in at $0.4 billion for a 3% margin, while adjusted was slightly lower, and free cash flow improved. The FCF improvement is significant at $2.3 billion and will allow the company to continue its modernization and value-building efforts. 

United Airlines Flies High on Investor Value Gains

The balance sheet highlights are another reason the stock price advanced following the release and will likely complete a full reversal in 2025. While the sequential comparisons include slightly reduced equity, the decline is offset by share repurchases and the year-over-year (YOY) comparisons.

The YOY comps show cash, current, and total assets rising, outpacing liability gains, and equity up by 35%. Likewise, the share count is up compared to last year but down sequentially because buybacks paused during the COVID-19 pandemic and resumed in late 2024. The share count is expected to continue falling as the year progresses. 

Analysts reset their outlook before the earnings release, impacting the price action and leading to a deep value opportunity. The stock trades at only 6x its earnings outlook, with optimistic guidance and an outlook for a 50% upside at the consensus.

The post-release activity is more bullish, including a single price target increase issued within the first twelve hours that aligns with a consensus or higher price point. The institutions are also bullish on this stock, having bought on balance for seven consecutive quarters and activity ramping to a multi-year high in H1 2025.