United Airlines (NASDAQ:UAL) achieved the highest quarterly EPS in Q2, reflecting stellar demand despite macro weakness. Thanks to the stronger-than-expected earnings, UAL stock is up about 3.3% in after-hours trading. Overall, UAL stock has gained over 45% year-to-date. While the stock gained quite a lot, solid demand and its wide network indicate a bright outlook.
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UAL Stock: Outlook Remains Bright
The favorable operating environment and record profit (its profit more than tripled) led UAL to strengthen its balance sheet through accelerated debt repayment. Impressively, UAL’s trailing twelve- month adjusted net debt to adjusted EBITDAR stood at 2.4x, which is at pre-pandemic levels and well below its target range of less than 3x.
Looking ahead, UAL’s CEO, Scott Kirby, highlighted that peak leisure demand months (March through October) are appearing stronger. Moreover, the company is still seeing strong demand, especially in its international segment.
To capitalize on international travel demand, UAL increased its capacity and announced new flights to Manila, Tokyo, Taipei, and Hong Kong. Earlier, it launched six new international trans-Atlantic routes. In addition, it ordered the largest widebody aircraft to maximize the success of its international business.
Guidance Beats Street’s Expectations
The momentum in UAL’s business will likely sustain throughout 2023. The company tightened the range of its Fiscal 2023 EPS outlook. It now expects to deliver adjusted earnings in the range of $11 to $12 per share, versus its earlier guidance of $10 to $12 a share.
Goldman Sachs analyst Catherine O’Brien highlighted that the “midpoint of the new range is ahead of consensus of $9.78 heading into the print.”
UAL expects its Q3 EPS to be in the range of $3.85 to $4.35, the midpoint of which is also higher than the Street’s expectations of $3.76.
The analyst is bullish about UAL stock following the Q2 print and has a price target of $61. Meanwhile, Citi analyst Stephen Trent also reiterated a Buy on UAL stock on July 19. His price target of $75 implies 36.86% upside potential from current levels.
What is the Price Target for UAL?
While UAL stock has gained quite a lot, Wall Street analysts see further upside in shares of this airline company. Analysts’ average price target of $63.97 implies 16.73% upside potential from current levels.
UAL stock has a Moderate Buy consensus rating, reflecting six Buy, four Hold, and one Sell recommendations.
