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For Your Education and Enjoyment

Strong Dollar + Buybacks = Big Upside for United Airlines Stock

Written by Gabriel Osorio-Mazilli. Published 10/22/2025.

Key Points

United Airlines stock is gaining momentum, driven by macroeconomic tailwinds including lower fuel costs, a strong U.S. dollar, and rising demand for domestic and international travel.
The company posted strong quarterly earnings, highlighted by a 6.7% year-over-year increase in free cash flow and nearly $600 million in stock buybacks, signaling management's confidence.
Forward guidance suggests significant valuation upside, with projected EPS between $9.00 and $11.00 and price targets implyinga 37% gain from current levels.

After a 7.8% rally in a single week, shares of United Airlines Holdings Inc. (NASDAQ: UAL) are catching investor attention once again.

The stock's recent surge isn't just a short-term technical move; it is being driven by improving fundamentals and stronger forward guidance. Favorable macro trends are also helping — low oil prices are only part of the story — and a larger shift in currencies may further boost domestic travel spending.

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As the dollar index breaks out of its multi-month range, it enhances purchasing power domestically, making travel more attractive for U.S.-based consumers. This rising trend is a potential driver behind recent momentum in the transportation sector, including airline stocks.

In fact, many of First Trust Nasdaq Transportation ETF's (NASDAQ: FTXR) top holdings are airline names, indicating broader market confidence in the group. That momentum presents a fresh opportunity for further upside in United Airlines.

Q3 Earnings Reveal Strong KPIs and Margins

United's recent quarterly earnings results show where the company stands and which key performance indicators (KPIs) investors should watch going forward. It's understandable to be cautious when a stock trades at 86% of its 52-week high, but the report suggests much of the company's future growth potential is still not fully priced in.

Available seat miles, a common KPI in the airline industry, rose 6.6% in the United States and Canada and 5.3% internationally. That increase in capacity indicates that, despite inflation and budgeting uncertainty, travelers remain willing to spend on this discretionary item.

A key takeaway from the earnings call is that United's premium seating footprint hit a record high in terms of available seats and bookings. That growth positions United not only as a volume player but as a premium competitor, which should boost revenue per seat and margin potential.

Helping margins further, aircraft fuel costs dropped 11.4% year-over-year, providing immediate relief to the company's bottom line. With cost savings and rising demand converging, United Airlines is well-positioned to expand profitability.

While EPS often grabs headlines, free cash flow (FCF) is crucial for capital-intensive businesses like airlines. In the past quarter, United reported $3.4 billion in FCF, up from $3.1 billion a year earlier — a 9.7% increase. Strong FCF allows the company to return capital to shareholders, which it is actively doing.

The company repurchased $589 million worth of stock, signaling management's belief that shares are undervalued. Buybacks not only boost EPS but also serve as a clear vote of confidence in future performance.

Valuation Leaves Room for Takeoff

Following a robust quarter, management raised full-year EPS guidance to a range of $9.00 to $11.00. Even at the midpoint, the valuation story looks compelling.

With UAL stock trading at roughly a 10x P/E ratio compared to the transportation industry's average of 15x, there appears to be clear upside.

Applying the sector average to the low end of guidance suggests a fair value of $134 per share, and $163.90 on the high end.

That outlook contrasts with the analyst consensus price target of $125, which implies about 25% upside.

More bullish analysts, such as Evercore's Duane Pfennigwerth, have set price targets as high as $135, indicating roughly 37% potential upside from current levels.

Opportunity Is Still on the Runway

With demand holding steady, margins improving, and guidance pointing higher, United Airlines stock appears undervalued relative to its growth outlook. Tailwinds from a stronger dollar and potential rate cuts from the Federal Reserve through 2025 could further support travel volumes.

As long as United continues to generate strong cash flows and reward shareholders through buybacks, the path to a higher valuation looks wide open. For both new and existing investors, UAL offers a compelling case for long-term appreciation, backed by tangible fundamentals and market momentum.

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