United Airlines' "dual scenario" guidance wows Wall Street, with Goldman Sachs Group, Inc. raising the target price to $92.

The American Airlines Group Inc. leader, United Airlines (UAL.US), announced its first quarter performance for 2025 after the US stock market closed on Tuesday. Following the release of the company's performance and latest guidance, financial giant Goldman Sachs Group, Inc. issued a research report stating that the adjusted earnings per share (EPS) for the first quarter ending in March were $0.91, significantly higher than the FactSet Wall Street consensus expectation and Goldman Sachs Group, Inc.'s estimate of $0.74/$0.60, as well as better than the lower end of the performance guidance range recently provided by management ($0.75 to $1.25). Overall, Goldman Sachs Group, Inc. believes that the Q1 performance exceeded expectations (10% higher than the original forecast mid-point), combined with the surprising outlook for the second quarter and the "double scenario" guidance, significantly outperforms the pessimistic expectations of Wall Street investment institutions for the fundamentals of United Airlines. The research firm reaffirmed its 12-month target stock price of $92 for United Airlines and a "buy" rating. In the research report, Goldman Sachs Group, Inc. stated that the unexpectedly strong performance of United Airlines in the first quarter was mainly due to better-than-expected unit cost performance (partly benefiting from higher capacity growth than the FactSet consensus and Goldman Sachs Group, Inc. forecast) and improving unit revenue data, partly offset by higher fuel costs. Detailed performance data for United Airlines in Q1 showed total revenue of approximately $13.2 billion, a year-on-year increase of 5.3%; net profit was $387 million, compared to a net loss of $124 million in the same period last year; adjusted earnings per share were $0.91, higher than the FactSet consensus expectation of $0.74. More importantly, the airline expects to maintain a resilient profit even in a period of economic downturn caused by tariff policies, undoubtedly relieving investors. Investors are highly focused on United Airlines' full-year EPS guidance. Despite the pessimistic demand environment under the pressure of Trump's tariff policies and the highly uncertain global macroeconomic background, Goldman Sachs Group, Inc. recently found in conversations and market research with investors that the market generally expected management to withdraw their guidance or significantly lower it to a loss. However, United Airlines' management chose a radically different proactive approach than the market expectations, introducing two forecast scenarios: one is a "stable" scenario with recent relatively weak booking trends maintained; the other is a "recession" scenario, but in both scenarios, United Airlines' management expects to be profitable, rather than falling into loss as expected by the market due to tariff pressures. In the "stable" booking scenario, the company maintains its 2025 adjusted EPS guidance of $11.50 to $13.50 unchanged. The "two scenarios" provided by United Airlines' management show that under the "stable" base booking scenario, the company continues to maintain its previously disclosed 2025 adjusted EPS guidance of $11.50 to $13.50; under the "recession" forecast scenario, management expects the 2025 adjusted EPS to be $7.00 to $9.00, compared to Goldman Sachs Group, Inc.'s analysts' previous recession scenario analysis with an example EPS of about $6.20, so United Airlines' "recession" scenario EPS expectations significantly exceed the Goldman Sachs Group, Inc. analyst team's expectations. Goldman Sachs Group, Inc. stated that the above adjusted EPS forecast range is quite attractive compared to the market consensus of $10.52 and Goldman Sachs Group, Inc.'s estimate of $9.75. The airline also provided a quarterly adjusted EPS guidance range of $3.25 to $4.25 until June, with the midpoint slightly below the market/Goldman Sachs Group, Inc. consensus of $3.91/$3.80, but the upper limit of the guidance is higher than the market and Goldman Sachs Group, Inc. expectations. In terms of capacity reduction plans, United Airlines' management will reduce the capacity growth compared to the original plan by 4 percentage points from the quarter ending in September; in terms of capital expenditure reduction, the current capital expenditure is expected to be less than $6.5 billion (originally expected to be less than $7 billion). With fleet adjustments involving only a reduction of 1 787 aircraft and the addition of 1 737 MAX, Goldman Sachs Group, Inc. believes that the adjustment mainly comes from an unexpectedly large reduction in non-aircraft capital expenditures, which may boost profit growth due to lower-than-expected expenses. The analyst team at Goldman Sachs Group, Inc. continues to maintain a "buy" rating on United Airlines and a 12-month target price of $92 (unchanged), based on the EBITDAR valuation method. The firm applied Goldman Sachs Group, Inc.'s forecasted EBITDAR of $13 billion to a 4.0x EV/EBITDAR multiple. This valuation multiple is roughly in line with the average 4.0x EV/EBITDAR from 2011-2019. At the close of the US stock market on Wednesday, United Airlines' stock price closed at $66.99, indicating a potential 37% upside in the next 12 months according to Goldman Sachs Group, Inc. Goldman Sachs Group, Inc. stated thatIn terms of expectations for United Airlines' stock price and fundamentals, the main risk factors include: 1) competitive factors weakening the benefits of airline network restructuring in response to performance growth plans 2) further delays in the delivery schedule of Boeing or Airbus aircraft 3) slower-than-expected recovery process in Asia-Pacific demand.No, gracias, estoy bien.