Airline company United Airlines Holdings (NASDAQ:UAL) beat Wall Street’s revenue expectations in Q4 CY2024, with sales up 7.8% year on year to $14.7 billion. Its non-GAAP profit of $3.26 per share was 7.7% above analysts’ consensus estimates.

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"United had a unique strategy coming out of COVID and our people have delivered for customers leading to a structurally and permanently changed industry," said United Airlines CEO Scott Kirby.

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.

Travel and Vacation Providers

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.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, United Airlines grew its sales at a sluggish 5.7% compounded annual growth rate. This was below our standard for the consumer discretionary sector and is a tough starting point for our analysis.

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 annualized revenue growth of 12.7% over the last two years is above its five-year trend, but we were still disappointed by the results.

United Airlines also discloses its number of revenue passenger miles, which reached 64.46 billion in the latest quarter. Over the last two years, United Airlines’s revenue passenger miles averaged 12.8% 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 reported year-on-year revenue growth of 7.8%, and its $14.7 billion of revenue exceeded Wall Street’s estimates by 2.5%.

Looking ahead, sell-side analysts expect revenue to grow 5.6% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

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Cash Is King

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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 3.2%, lousy for a consumer discretionary business.

United Airlines’s free cash flow clocked in at $549 million in Q4, equivalent to a 3.7% margin. Its cash flow turned positive after being negative in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

Key Takeaways from United Airlines’s Q4 Results

It was encouraging to see United Airlines beat analysts’ revenue expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. Overall, this quarter had some key positives. The stock traded up 4.8% to $115.90 immediately following the results.

United Airlines had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.