Tuesday, United Continental shares (NASDAQ:UAL) received a modest boost in their price target from Jefferies, now set at $52, up from the previous $50. The airline retains its Hold rating despite the adjustment.
The revision reflects United Continental's strategic decisions during the pandemic, which included keeping its entire widebody fleet. This move contributed to the company achieving record international profits in 2023, surpassing its competitors and its own performance in 2019.
United Continental's international operations are expected to normalize in 2024, shifting the spotlight to its domestic strategy. This strategy is influenced by the United Next initiative, although the momentum has experienced a temporary setback due to delays with the MAX-10 aircraft. The analyst from Jefferies noted that these delays have paused the airline's efforts to increase the size of its fleet, known as upgauging.
The airline's financial strategy has been highlighted as a positive step towards recovering its free cash flow (FCF). By reallocating capital expenditures (capex) to other areas, United Continental is on track to return to positive FCF generation. However, the analyst pointed out that the company will need to adjust its long-term targets during the upcoming May Investor Day to reflect the current business environment.
United Continental's decision to retain its widebody fleet during challenging times has been crucial for its international segment's success. As the market dynamics evolve, the company is now focusing on recalibrating its long-term financial goals to align with the changing industry landscape and its own strategic shifts, particularly in the domestic market. The updated price target from Jefferies reflects cautious optimism about the airline's direction and financial health.
InvestingPro Insights
As United Continental (NASDAQ:UAL) navigates its post-pandemic recovery and refocuses on domestic strategy, the latest data from InvestingPro presents a mixed financial picture. The company is trading at a low earnings multiple with a P/E ratio of 5.97, indicating that its stock may be undervalued relative to its earnings. The P/E ratio has adjusted further down to 4.66 for the last twelve months as of Q4 2023, suggesting that investors could be overlooking United's earning potential.
The company has demonstrated strong revenue growth of 19.49% over the last twelve months, with a quarterly increase of 9.89% in Q4 2023, reflecting its robust recovery trajectory. Despite a significant debt burden, United Continental has managed a notable return on assets of 3.78% during the same period. These financial metrics underscore the airline's resilience and potential for profitability, which is also echoed by analysts' predictions for the year.
For investors seeking a deeper dive into United Continental's financial health and stock performance, InvestingPro offers additional insights. There are 8 more InvestingPro Tips available, including the company's status as a prominent player in the Passenger Airlines industry and its stock price volatility. To gain access to these valuable tips and more, use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.