United Airlines delivered another strong performance in its latest earnings report on Tuesday, posting revenue and earnings above expectations. This follows Delta Airlines Jan. 10 earnings release, which also exceeded revenue and earnings estimates. Both airlines highlighted an atypical surge in winter travel demand, a period that traditionally sees a slowdown following the holidays. This trend reflects a changing travel landscape, with consumers showing sustained interest in flying during what has historically been a quiet season. Factors such as increased flexibility in work arrangements, resilient leisure demand, and the rebound of international travel likely contribute to this unusual strength. United’s share price has outperformed Delta’s over the past few months, with its stock surging an impressive 188% since hitting its 2024 lows on August 5 of last year. In contrast, despite its strong performance, Delta’s stock has risen just under 80% over the same period. This rapid appreciation in United’s stock price has brought its valuation in line with Delta’s, erasing a significant discount last summer when Delta’s price-to-forward-earnings ratio was approximately 50% higher than United’s. However, based on current valuation metrics, Delta is the more attractive investment now. One key differentiator is free cash flow (FCF). Wall Street projects Delta to generate well over $4 billion in FCF for 2025, more than double the less than $2 billion expected for United. Despite this significant difference, the enterprise values of the two airlines are within about 10% of each other. Consequently, Delta offers a far higher projected FCF yield. Revenue growth forecasts add another layer of complexity to the comparison. Analysts anticipate over 6% year-over-year revenue growth for United in 2025, compared to stagnant revenue projections for Delta. However, the revenue trends of both airlines have historically tracked broader industry patterns and each other quite closely (charts below), suggesting that such a wide divergence in growth may not materialize. If industry-wide factors like macroeconomic conditions, fuel costs, and consumer demand impact both companies similarly, these forecasts might converge. Given the parity in price-to-earnings ratios, Delta’s superior free cash flow yield tips the scale in its favor for long-term investors. While United’s recent outperformance is undeniable, the valuation narrative has shifted, with Delta offering more compelling fundamentals. As both airlines gear up for what could be a robust winter travel season, investors must weigh United’s growth potential against Delta’s more substantial cash flow generation. Delta emerges as the more attractive option. At least one institutional trader recently bet on further upside for Delta in 2025, buying 5,000 December $80 calls, paying a $5.05 contract in mid-December last year. Those calls are still close to that price, around $5.40/contract as of today, January 22nd, 2025. While long-dated calls provide levered upside exposure with defined risk, a lower strike improves the probability that the long call will end up in the money. Another consideration is that the median realized volatility over the past few years is ~ 29.5. As expected, volatility is generally lower during periods that do not include a quarterly earnings release. As an alternative to purchasing the December $80s, one could choose a lower strike January option and sell March strangles, which are currently trading with an implied volatility of > 33% against it to offset the decay. The March strangle expires before Delta’s next anticipated earnings release, estimated for April 10th. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
- Advertisment - 
Recent Comments
on Iowa State starting RB Jirehl Brock among latest college football players charged in gambling probe
on The Rev. Al Sharpton to lead protest after Florida governor’s ban of African American studies course
on Sports World Hails ‘Superwoman’ Lindsey Vonn for Her Grand Comeback Despite Career-Changing Injury
on San Mateo County Community College District sues five companies over role in ‘pay to play’ scandal
on Saipan, placid island setting for Assange’s last battle, is briefly mobbed – and bemused by the fuss
on ‘Pokémon Scarlet’ and ‘Violet’ Fan Theories Suggest Legendary Time Travel, Alternate Dimension Plot
on Joe Manchin and Tommy Tuberville introduce bill on name, image and likeness rules for college sports
on Inside the Michael Jordan ‘Air’ movie, plus why NFL, others are buying into the sports film industry
on If you’re a frequent traveler, these wrap tops from Aday will revolutionize your on-the-go wardrobe
on How Does Jack Nicklaus Travel? Exploring the Private Jets Owned by the ‘Golden Bear’ Over the Years
on Hollywood Reporter: Tom Cruise negotiated with movie studios over AI before the actors strike began
on Ford Blue Cruise: US regulators investigate fatal crashes involving hands-free driving technology
on Dozens of boats cruise the Seine in a rehearsal for the Paris Olympics’ opening ceremony on July 26
on Devout athletes find strength in their faith. But practicing it and elite sports can pose hurdles
on Despite strong Lunar New Year holiday data, consumer spending in China isn’t roaring back just yet
on David and Victoria Beckham so ‘Charmed’ by Tom Cruise They Have His Photos on Display at Their Home
on CONCEPT ART: New Details Revealed for Disney Cruise Line Lookout Cay at Lighthouse Point Destination
on CBS Sports announces Matt Ryan will join NFL studio show. Longtime analysts Simms and Esiason depart
on Boston College vs. Army live stream, how to watch online, CBS Sports Network channel finder, odds
on Boise State vs. Air Force live stream, odds, channel, prediction, how to watch on CBS Sports Network
on Biden to tout bill’s prescription drug prices, energy provisions in pitch to Americans, aide says
on After UFC Fallout, Conor McGregor Offers a Valuable Piece of Advice to Free Agent Francis Ngannou
on 2024 Super Bowl: CBS Sports Network and CBS Sports HQ to combine for 115 hours of weeklong coverage
on ‘Best Intention’: Chris Kirk Has Absolute Trust in Jay Monahan and PGA Tour’s Widely Debated Model
on 2023 NFL All-Rookie Team: CBS Sports draft expert, former GM unveil league’s best first-year players
on “Completely Knocked Me Out”: Rob Lowe Recalls Boxing Match With Tom Cruise On 1983 Brat Pack Classic
on CONCEPT ART: New Details Revealed for Disney Cruise Line Lookout Cay at Lighthouse Point Destination
on “Completely Knocked Me Out”: Rob Lowe Recalls Boxing Match With Tom Cruise On 1983 Brat Pack Classic
on CBS Sports announces Matt Ryan will join NFL studio show. Longtime analysts Simms and Esiason depart
on Carlos Sainz’s Soccer Fanboy Emerges as Spaniard Shares Defining Moment With This Real Madrid Legend
on Biden: ‘At this point I’m not’ planning to visit East Palestine, Ohio, after toxic train derailment
on ‘Best Intention’: Chris Kirk Has Absolute Trust in Jay Monahan and PGA Tour’s Widely Debated Model
on Ahead of big sports weekend, dispute with Disney leaves millions of cable subscribers in the dark
on A heavy wave of Russian missile attacks pounds areas across Ukraine, killing at least 4 civilians
on 2024 Super Bowl: CBS Sports Network and CBS Sports HQ to combine for 115 hours of weeklong coverage
on 2023 NFL All-Rookie Team: CBS Sports draft expert, former GM unveil league’s best first-year players
on Army vs. Coastal Carolina live stream, how to watch online, CBS Sports Network channel finder, odds
on AL Rookie of the Year Julio Rodriguez Spreads Joy and Sportsmanship to the Youth of Loma de Cabrera
on After UFC Fallout, Conor McGregor Offers a Valuable Piece of Advice to Free Agent Francis Ngannou
on Dubai International Airport sees 41.6 million passengers in first half of year, more than in 2019
on Devout athletes find strength in their faith. But practicing it and elite sports can pose hurdles
on Despite strong Lunar New Year holiday data, consumer spending in China isn’t roaring back just yet
on Dave Portnoy: Taylor Swift’s security should ‘drag Kim Kardashian to jail’ if she attends Eras Tour
on CONCEPT ART: New Details Revealed for Disney Cruise Line Lookout Cay at Lighthouse Point Destination
on “Completely Knocked Me Out”: Rob Lowe Recalls Boxing Match With Tom Cruise On 1983 Brat Pack Classic
on CBS Sports, Serie A announce new TV rights deal; Paramount+ to air over 400 Italian soccer matches
on Cam Newton’s Violent Public Incident Draws Hilarious Reaction From 3x All-Star: “Where Do I Sign Up
on Boston College vs. Army live stream, how to watch online, CBS Sports Network channel finder, odds
on Angel Reese Launches Foundation Dedicated To Empowering Women Through Sports & Financial Literacy
on A weaker dollar, skyrocketing prices and ‘record’ visitor numbers: Good luck in Europe this summer