As we progress through the Q4 earnings season investors may still be digesting the quarterly results from several airliners last week including the likes of United Airlines UAL and American Airlines AAL.
Their size and reach to international destinations tend to garnish investors' attention over regional carriers such as Southwest Airlines LUV and Alaska Air Group ALK which both reported Q4 results last week as well.
Like their regional counterparts, American and United were able to surpass their quarterly top and bottom line expectations despite facing very tough to-compete-against quarters attributed to the sharp rebound in travel during Q4 2022. With that being said, let's see if now is a good time to buy stock in either of these popular airliners.
American Q4 Review
Fourth quarter reports from American and United were much anticipated as the largest and third largest air carriers in the nation in terms of annual passengers. Neither disappointed but American certainly stood out with Q4 earnings of $0.29 a share blasting the Zacks Consensus of $0.06 a share by 383%. Quarterly sales of $13.06 billion slightly beat estimates of $13.02 billion.
Furthermore, American has now surpassed earnings expectations in six consecutive quarters and has posted a very impressive average earnings surprise of 119% in its last four quarterly reports.
Overall, annual earnings continued to rebound with American rounding out fiscal 2023 with EPS soaring 430% to $2.65 per share versus $0.50 a share in 2022. Even better, American had a record year for revenue with total sales climbing 8% year over year to $52.78 billion.
United Q4 Review
As for United, Q4 earnings of $2.00 a share beat expectations of $1.61 a share by 24% with sales of $13.62 billion just above estimates of $13.54 billion. United has topped earnings expectations for six straight quarters as well and posted an average earnings surprise of 18% in its last four quarterly reports.
United ended FY23 with annual earnings soaring 299% to $10.05 per share compared to $2.52 a share in 2022. The company also continued its strong rebound in revenue as well with total sales climbing 19% to $53.71 billion.
Attractive Valuations
Although American’s stock is down -9% over the last year while United shares have dropped -13%, both our making the case for being vastly undervalued at the moment. To that point, both trade at significant discounts to the Zacks Transportation-Airline Industry average of 10.3X forward earnings with American at 6.9X and United at just 4.3X.
This is well below many regional carriers with Southwest trading at 18.9X forward earnings and Alaska Air at 8X.
Takeaway
Strong Q4 results certainly added to the notion that American Airlines and United Airlines stocks are undervalued. Despite the first quarter traditionally being the weakest period for air travel both stocks land a Zacks Rank #3 (Hold) as they could very well reward longer-term investors from their current levels.
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As we progress through the Q4 earnings season investors may still be digesting the quarterly results from several airliners last week including the likes of United Airlines UAL and American Airlines AAL.
Their size and reach to international destinations tend to garnish investors' attention over regional carriers such as Southwest Airlines LUV and Alaska Air Group ALK which both reported Q4 results last week as well.
Like their regional counterparts, American and United were able to surpass their quarterly top and bottom line expectations despite facing very tough to-compete-against quarters attributed to the sharp rebound in travel during Q4 2022. With that being said, let's see if now is a good time to buy stock in either of these popular airliners.
American Q4 Review
Fourth quarter reports from American and United were much anticipated as the largest and third largest air carriers in the nation in terms of annual passengers. Neither disappointed but American certainly stood out with Q4 earnings of $0.29 a share blasting the Zacks Consensus of $0.06 a share by 383%. Quarterly sales of $13.06 billion slightly beat estimates of $13.02 billion.
Furthermore, American has now surpassed earnings expectations in six consecutive quarters and has posted a very impressive average earnings surprise of 119% in its last four quarterly reports.
Overall, annual earnings continued to rebound with American rounding out fiscal 2023 with EPS soaring 430% to $2.65 per share versus $0.50 a share in 2022. Even better, American had a record year for revenue with total sales climbing 8% year over year to $52.78 billion.
United Q4 Review
As for United, Q4 earnings of $2.00 a share beat expectations of $1.61 a share by 24% with sales of $13.62 billion just above estimates of $13.54 billion. United has topped earnings expectations for six straight quarters as well and posted an average earnings surprise of 18% in its last four quarterly reports.
United ended FY23 with annual earnings soaring 299% to $10.05 per share compared to $2.52 a share in 2022. The company also continued its strong rebound in revenue as well with total sales climbing 19% to $53.71 billion.
Attractive Valuations
Although American’s stock is down -9% over the last year while United shares have dropped -13%, both our making the case for being vastly undervalued at the moment. To that point, both trade at significant discounts to the Zacks Transportation-Airline Industry average of 10.3X forward earnings with American at 6.9X and United at just 4.3X.
This is well below many regional carriers with Southwest trading at 18.9X forward earnings and Alaska Air at 8X.
Takeaway
Strong Q4 results certainly added to the notion that American Airlines and United Airlines stocks are undervalued. Despite the first quarter traditionally being the weakest period for air travel both stocks land a Zacks Rank #3 (Hold) as they could very well reward longer-term investors from their current levels.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
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