United’s effective cost control, improving corporate demand to drive earnings growth – UBS

United Airlines’ (NASDAQ:UAL) conservative EPS guidance for FY25 might have left Wall Street slightly unimpressed, but the $9 to $11 per share range convinced UBS’s Thomas Wadewitz that revenue at Newark Liberty International Airport is normalizing, and corporate travel is improving.

Accordingly, Wadewitz raises his price target for Buy-rated United (NASDAQ:UAL) by 11% to $114 and EPS estimates for Q4 by 17% to $2.90 and for FY26 by 11% to $14.25, supported by well controlled costs, improving demand, and recovery at Newark.

While the outlook towards Newark operations and improving corporate demand is supportive of improved profitability, the other half comes from United’s (NASDAQ:UAL) effective cost management, illustrated by an “impressive” CASM ex performance of only 2.2% year-over-year versus UBS’s +4.1% estimate. This was facilitated by strong network operations, even as the carrier took a charge for signing bonuses in the flight attendants’ new contract.

“Despite realizing the inflationary pressure from the [flight attendant] contract in the second half, United indicated they can continue to deliver well controlled CASM ex-fuel in H2 2025,” Wadewitz says, forecasting 2.5% CASM ex-fuel for the second half of this year on a 5% to 6% increase in capacity.

By comparison, Delta Air Lines (DAL), which was the first carrier to release Q2 results, reported a 2.7% increase in CASM ex-fuel for the second quarter on 4% capacity growth.

For the remainder of the airline industry, American Airlines Group (AAL) reports on July 24, expected to earn an adjusted profit of $0.77 per share on $14.3B in revenue.

Southwest Airlines (LUV) also releases second quarter results July 24, expected to earn an adjusted profit of $0.51 on $7.3B in revenue.

JetBlue (JBLU) reports on July 29, expected to show an adjusted loss of $0.33 per share on $2.29B in sales.