Why United Airlines shares fell 7% despite huge deal with Boeing

A big day for United Airlines was overshadowed by inflation data, which some analysts say presented a potential buying opportunity in the stock.

Shares of the airline fell nearly 7% yesterday despite huge news that United would buy 200 787 Dreamliners from Boeing. Shares fell another 1% in pre-market trading on Wednesday, and the company’s ticker page remains one of the most visited on Yahoo Finance.

“The decline is likely in response to the CPI [Consumer Price Index] report showing airfares in the U.S. fell 3% from October to November,” CFRA analyst Colin Scarola wrote in a note shortly after the latest CPI reading. price trends from UAL. For example, the CPI data showed that US airfares fell 8% from Q2 to Q3, but UAL’s actual prices fell only 1% Q/Q in Q3. Furthermore, some moderation in air fares can be expected given the extent to which fuel prices have fallen recently, allowing airlines to charge less while increasing profitability. Notably, UAL forecasts an average fuel price of $3.61 for the fourth quarter, but as of today jet fuel prices are below $2.70 (-25% vs. forecast).

Rival airlines such as Delta, Jetblue and Southwest also suffered major losses on Tuesday.

Scarola added that the sell-off was exaggerated and reiterated a buy recommendation on United’s shares. Haar also raised his profit expectations for United for 2022, 2023 and 2024 and raised the price target from $59 to $60.

The move in United’s stock came as the airline played a major role in improving profitability over the next decade.

Stan Deal, CEO of Boeing Commercial Airplanes, speaks at a joint press event with United Airlines at the Boeing manufacturing facility in North Charleston, South Carolina, on Dec. 13, 2022. — Betting strong demand for international travel, United Airlines unveiled an order on Tuesday of 100 new Boeing 787 Dreamliners with options for an additional 100 jets.  (Photo by Logan Cyrus / AFP) (Photo by LOGAN CYRUS/AFP via Getty Images)

Stan Deal, CEO of Boeing Commercial Airplanes, speaks at a joint press event with United Airlines at the Boeing manufacturing facility in North Charleston, South Carolina, on Dec. 13, 2022. (Photo by Logan Cyrus/AFP)

The carrier announced Tuesday that it has placed an order for 100 of Boeing’s first-class 787 Dreamliners with options to purchase 100 more. In a press release, United described the purchase as “the largest widebody order by a US airline in commercial aviation history” and said delivery is expected between 2024 and 2032.

United also exercised options to buy 44 Boeing 737 Max aircraft for delivery between 2024 and 2026, adding that the orders will lead it to hire 15,000 new employees in 2023.

“We are setting records in travel demand every month,” United CEO Scott Kirby told Yahoo Finance Live. happen, but not a requirement if the recovery is less robust than we expect.”

And while Kirby said that “if you squint hard… [you could] look at what I would call pre-recession behavior,” he reaffirmed that the ongoing travel uptick from the COVID-19 pandemic is continuing this year and that “demand for us is very strong right now.”

Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.

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