The recently reported quarterly results of major airlines reflected strong travel demand despite a hike in airfares. Moreover, lower jet fuel prices helped in boosting profitability. The rebound in travel demand following the COVID-19 pandemic has been very strong, with consumers willing to pay more for enhanced travel experiences. Given the favorable demand backdrop, we used TipRanks’ Stock Comparison Tool to place Delta Air Lines (DAL), United Airlines (UAL), and Southwest Airlines (LUV) against each other to find the best airline stock, according to Wall Street analysts.
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Delta Air Lines (NYSE:DAL)
Delta Air Lines is a prominent airline with a vast domestic and international network that helps in offering flights to over 290 destinations on six continents. Last month, the carrier reported strong Q4 results and issued better-than-expected guidance for the first quarter of 2025.
The company’s Q4 2024 results gained from a preference for premium travel, with customers ready to spend on roomier seats despite macro uncertainties. Delta’s results also reflected its focus on cost efficiencies, with CFO Dan Janki calling Q4 2024 “the most profitable December quarter in our history.”
It is worth noting that Delta continued to improve its financial strength in 2024 and returned to investment grade at all three credit rating agencies (Fitch Ratings, Moody’s, and S&P Global). Leverage improved to 2.6x in 2024 and the company expects to continue to meaningfully repay debts, with the aim of improving leverage to 2.0x or less. Additionally, DAL aims to generate free cash flow of over $4 billion this year, up from $3.4 billion in 2024.
Is DAL Stock a Buy, Sell, or Hold?
Following the Q4 print, Deutsche Bank analyst Michael Linenberg increased the price target for Delta Air Lines stock to $82 from $80 and reiterated a Buy rating. The five-star analyst stated that moderating capacity growth in the U.S. continues to strengthen Delta’s yields while international travel demand remains robust. Additionally, Linenberg expects Delta Air Lines to benefit from the continued preference for premium experiences.
Remarkably, Delta Air Lines stock earns a Strong Buy consensus rating based on 15 unanimous Buys. The average DAL stock price target of $83.07 implies 29.1% upside potential from current levels. DAL stock has rallied more than 60% over the past year.
United Airlines (NASDAQ:UAL)
United Airlines ended 2024 on a strong note by reporting market-crushing fourth-quarter earnings and announcing strong guidance for the first quarter. Like its peer Delta, United Airlines also benefited from the demand for premier travel experiences, solid international travel, and an attractive loyalty program.
The company expects robust travel momentum to continue this year. In particular, UAL expects domestic Revenue per Available Seat Mile (RASM), a key efficiency metric for the airline sector, to turn “solidly positive” on a year-over-year basis. It also expects continued improvement in international RASM.
Backed by strong demand trends, United Airlines believes that it is on track to deliver double-digit pre-tax margins.
Is UAL a Good Stock to Buy?
In reaction to Q4 2024 results, CFRA analyst Ana Garcia upgraded UAL stock to Buy from Hold and increased the price target to $123 from $100. The analyst explained that while the revised price target indicates a premium valuation compared to the historical P/E average, it is justified due to the company’s solid execution of margin initiatives.
Garcia noted that UAL’s Q4 revenue was driven by broad-based strength across Passenger, Cargo, and Ancillary revenue streams. Further, the analyst highlighted that growth in the Premium Cabin, Loyalty Program, and Basic Economy revenue reflected the company’s ability to capture demand across customer segments. Garcia also highlighted UAL’s effective cost management that drove higher profitability. Finally, the analyst pointed out that the company is targeting a double-digit EBT (earnings before taxes) margin, supported by network optimization and operational improvements.
With 16 unanimous Buys, Wall Street has a Strong Buy consensus rating on United Airlines stock. The average UAL stock price target of $135.13 implies about 31% upside potential. UAL stock has jumped about 146% over the past year.
Southwest Airlines (NYSE:LUV)
Budget carrier Southwest Airlines is gradually reaping the benefits of the initiatives it announced at the Investor Day held in September 2024. These initiatives came amid pressure from activist investor Elliott Investment Management, which pushed for a board and management shakeup due to the airline’s poor performance. Southwest settled the feud with Elliott in October 2024, agreeing to add five Elliott nominees to its board.
The carrier’s Q4 2024 results reflected the impact of its strategic efforts, including aircraft sale-leasebacks and vacation packages, to improve revenue and liquidity. While the company slightly missed Q4 revenue estimates, the overall results gained from impressive travel demand and improved airfares.
As part of its streamlining measures, on February 18, Southwest announced its first-ever major job cut in 53 years, slashing 15% of its corporate staff.
What Is the Price Target for LUV Stock?
On February 11, Argus analyst John Staszak upgraded Southwest stock from Hold to Buy with a price target of $35. The five-star analyst stated that his upgrade reflects optimism about strong travel demand and management’s ability to implement its growth initiatives. Staszak noted that the company aims to increase capacity by 1% to 2% and fully utilize its existing fleet through 2027 as part of its efforts to offset rising costs and maximize revenue growth.
Unlike Staszak, TD Cowen’s Thomas Fitzgerald maintained a Hold rating on LUV stock and lowered the price target to $25 from $28, as the top-rated analyst waits to see consistent execution on revenue and operational initiatives before gaining conviction about Southwest.
Overall, Southwest Airlines stock has a Hold consensus rating on TipRanks based on four Buys, seven Holds, and four Sell recommendations. The average LUV stock price target of $32.97 implies about 10% upside potential. Southwest Airlines stock has declined 12% over the past year.
Conclusion
Wall Street is highly bullish on Delta Air Lines and United Airlines stocks and sidelined on Southwest Airlines. Analysts see comparable upside potential in DAL and UAL stocks. Both stocks are backed by strong financials and solid execution. These airlines are focused on further bolstering their financial position by reducing their debt levels. Overall, both DAL and UAL are attractive airline players and have scored unanimous Buy recommendations from all analysts covering these stocks.
