United Airlines Holdings stock experienced a climb on Friday after an analyst from Evercore ISI expressed confidence in the company’s focus on achieving positive free cash flow. Duane Pfennigwerth, the analyst, upgraded United’s shares to Outperform from In Line and increased the price target on the stock to $65 from $58.
In a research note, Pfennigwerth acknowledged that although there are many positive aspects to the company, the lack of balance in capital allocation, especially concerning high aircraft cap ex plans, has been holding them back. However, Pfennigwerth notes that there is now a change in the air, with recent financial leadership changes, including the appointment of Chief Financial Officer Michael Leskinen.
Leskinen has made it clear that managing the business towards positive free cash flow will be a top priority for the team over the coming years. In 2023, United reported negative free cash flow of $260 million, with analysts expecting negative free cash flow of $902 million for this year. Pfennigwerth expects the company to refine its plans and put a greater emphasis on free cash flow generation in the coming weeks leading up to the company’s May investor day.
This shift in capital allocation strategy would undoubtedly broaden the appeal of investing in United. As a result, United Airlines’ stock saw a 2.4% increase in early trading, reaching $42.62. Other airline stocks also experienced gains, with Delta Air Lines up 0.9%, JetBlue Airways up 1%, and American Airlines Group up 1.3%.