Why United and American Airlines Topped the Market Today

what happened

Two of the major US carriers, United Airlines (NYSE: UAL) and American Airlines (NYSE: AAL), managed to escape the wrath of a very bearish equities market on Thursday. Both stocks performed better than the S&P 500, with the former rising nearly 1% and the latter declining only marginally. Continued optimism about an important input, plus an analyst price-target bump, helped keep the two airborne.

so what

After a sharp decline Wednesday, the benchmark Brent Crude oil price saw another decline on Thursday. Although this wasn’t as significant, at less than 2%, it was enough to keep hope aloft that the commodity’s price won’t rise too high.

Image source: Getty Images.

Oil prices have a tangible and heavy impact on the fundamentals of airlines. Despite the many efficiencies of modern jets, they still consume great volumes of fuel. As a result, fuel and related expenses are typically the No. 2 expense for air carriers — hence, the reason why investors fret when oil prices rise suddenly and steeply and are relieved when the opposite occurs.

now what

Meanwhile, two other developments helped lift United stock into positive territory. wednesday night, The Wall Street Journal published an article stating that the company will allow unvaccinated employees to return to work at the end of March. The newspaper cited “people familiar with the decision,” as its sources, although the company hasn’t yet made an official announcement on the matter.

Second, investment-research firm CFRA upgraded its recommendation on United stock. It now believes the company is a strong buy, up from its previous buy. At the same time, though, it cut its price target to $46 per share; previously, it was $55.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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