United Airlines (UAL)

Airline company United Airlines Holdings (NASDAQ:UAL) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 2.6% year on year to $15.23 billion. Its non-GAAP profit of $2.78 per share was 4% above analysts’ consensus estimates.

Company Overview

Founded in 1926, United Airlines Holdings (NASDAQ:UAL) operates a global airline network, providing passenger and cargo air transportation services across domestic and international routes.

The company offers premium cabin services, frequent flyer programs through MileagePlus, and ancillary services such as baggage handling and in-flight entertainment.

Airlines, hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.

Competitors in the airline industry include Delta Air Lines (NYSE:DAL), American Airlines Group (NASDAQ:AAL), and Southwest Airlines (NYSE:LUV).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, United Airlines grew its sales at a solid 20.7% compounded annual growth rate. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or trend. United Airlines’s recent performance shows its demand has slowed as its annualized revenue growth of 5.4% over the last two years was below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its number of revenue passenger miles, which reached 73.77 billion in the latest quarter. Over the last two years, United Airlines’s revenue passenger miles averaged 6.1% year-on-year growth. Because this number aligns with its revenue growth during the same period, we can see the company’s monetization was fairly consistent.

This quarter, United Airlines grew its revenue by 2.6% year on year, and its $15.23 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 7.4% over the next 12 months. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.

United Airlines’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 8.2% over the last two years. This profitability was mediocre for a consumer discretionary business and caused by its suboptimal cost structure.

This quarter, United Airlines generated an operating margin profit margin of 9.2%, down 1.4 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

In the coming year, Wall Street expects United Airlines to maintain its trailing 12-month operating margin of 8.3%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

United Airlines’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, United Airlines reported adjusted EPS of $2.78, down from $3.33 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 4%. Over the next 12 months, Wall Street expects United Airlines’s full-year EPS of $10.82 to grow 11%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

United Airlines has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.6%, lousy for a consumer discretionary business.

United Airlines burned through $153 million of cash in Q3, equivalent to a negative 1% margin. The company’s cash burn increased meaningfully year on year and is a deviation from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

Over the next year, analysts predict United Airlines’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 6.5% for the last 12 months will decrease to 3.5%.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

United Airlines historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.4%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, United Airlines’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

United Airlines reported $13.33 billion of cash and $25.99 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $8.14 billion of EBITDA over the last 12 months, we view United Airlines’s 1.6× net-debt-to-EBITDA ratio as safe. We also see its $242 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by United Airlines’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its revenue was just in line. Investors were likely hoping for more, and shares traded down 2.3% to $101.81 immediately following the results.

Updated: December 3, 2025 at 10:49 PM EST

When considering an investment in United Airlines, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

We see the value of companies helping consumers, but in the case of United Airlines, we’re out. To kick things off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, United Airlines’s number of revenue passenger miles has disappointed, and its anticipated operating margin expansion over the next year signals it will gain leverage on its fixed costs.

United Airlines’s P/E ratio based on the next 12 months is 8.5x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $122.90 on the company (compared to the current share price of $108.12).