2 "Cheap for a Reason" Airline Stocks That May Be Worth the Risk

Key Points

• Delta Air Lines and United Airlines both posted strong Q2 2026 earnings and raised or affirmed guidance despite rising jet fuel costs.
• Both stocks trade at price-to-earnings ratios below the broader market, with United's discount steeper and its upside to consensus price targets nearly double Delta's.
• United's recent stock decline despite beating earnings and raising guidance suggests investor sentiment about future fuel costs, not weak fundamentals, is driving the sell-off.

At a time when many technology stocks are expensive, some investors are looking to rotate into more attractive (i.e., cheaper) stocks that may present more upside. That’s why airline stocks may attract attention. Two of the most popular stocks in this sector look cheap based on their price-to-earnings (P/E) ratio relative to the market average.

But do they represent good value? After all, sometimes stocks are cheap for a reason, and that’s particularly true of airline stocks. Even when they’re not facing headwinds, airline stocks can be among the most difficult to own.

In fact, many investors (both retail and institutional) avoid airline stocks at all costs. Jet fuel costs create volatility, and consumer demand can be cyclical. Those are just two reasons why the margins for airline stocks are often tight.

All of which is to say that it’s important to look beyond the valuation of airline stocks.

This isn’t an article that’s going to make a case for “this time it’s different.” The reasons airline stocks may not be good investments remain in place. However, at this particular moment, the current economy could make a case for two airline stocks.

Delta's Hedge Advantage Holds Up

Delta Air Lines NYSE: DAL is frequently mentioned as the airline stock that even sector skeptics could own. In the current environment, the company’s ability to hedge its fuel costs helps offset the rising cost of jet fuel.

The company’s Q2 2026 earnings report laid out a convincing case for investors. The airline reported record quarterly revenue of $17.7 billion, an 18.7% year-over-year (YOY) increase. It posted an operating margin of 9%, beating guidance.

Despite rising jet fuel costs, Delta affirmed its full-year guidance. That included free cash flow of $3 billion to $4 billion. It also expects to return to earnings growth in the second half of the year.

The airline attributes this confidence to strong, broad-based demand, particularly in its premium, loyalty, and corporate segments.

This all comes at a time when higher fuel costs, in particular, make it difficult for low-cost carriers to undercut Delta on price.

DAL is up about 14% in 2026. That’s above the S&P 500 return of around 10.5% over the same period. However, the stock is trading in about the middle of its 52-week range and approximately 25% below its consensus analyst price target of $98.84.

With all that said, DAL trades around 13x earnings. While that's a discount to the broader market, it’s a premium to the stock's historic average.

United Is Making the Skeptics' Job Harder Too

United Airlines NASDAQ: UAL tells a similar story to Delta's, with one key difference: United absorbed a bigger fuel hit and still raised its guidance.

United's Q2 2026 revenue rose 16% YOY to $17.7 billion, matching Delta's topline growth almost dollar for dollar.

Adjusted earnings per share came in at $1.99, beating consensus estimates by roughly 6%.

Net income actually fell year over year, driven by a $2.3 billion jump in fuel costs. That’s the clearest reminder that the sector's core vulnerability hasn't gone anywhere.

However, despite rising fuel costs, United raised its full-year adjusted earnings per share (EPS) guidance to a range of $9 to $11, and pointed to premium cabin demand, loyalty program growth, and operational reliability (its best on-time Q2 departure rate since 2021) as the offsets to higher jet fuel costs.

Still, analysts remain wary: in the past two weeks, both Barclays (to $160 from $175) and UBS (to $137 from $153) trimmed their price targets, even as both firms kept Buy ratings.

UAL trades at a P/E ratio of under 10x, a steeper discount to the market than Delta's, and its consensus price target of $155.91 implies 47% upside, nearly double that of Delta in percentage terms.

UAL is down about 15% in the past 30 days. That’s pushed it to near the middle of its 52-week range. That means the valuation gap here is about a stock that's come down off its high and still looks statistically cheap.

The combination—a stock trading well below where analysts (even the ones getting more cautious) still see fair value, following a drop, with fundamentals that don't obviously justify it—is the clearest case in this piece of the market: pricing perception ahead of substance.

The Case Isn't "Buy Airlines"—It's Narrower Than That

Delta and United make similar arguments from different angles: disciplined capacity, resilient premium demand, and hedging or scale advantages that, for now, are outrunning fuel cost inflation. Neither story erases the reasons airlines trade at a structural discount. They still have thin margins, cyclical demand, and a cost structure that can turn on a single quarter of oil prices.

But with DAL and UAL trading significantly below consensus price targets to go along with solid fundamentals, is either stock worth owning?

United is the sharper test case. A company that beats earnings, raises guidance, and is still seeing its stock fall isn't being penalized for weak execution. Rather, it's being penalized for a market that's bracing for the next fuel shock, regardless of what the numbers say.

That's not proof that the stock is mispriced; skepticism about airline earnings quality has been earned over decades. But it is a real-time example of a "cheap for a reason" stock where the reason is increasingly driven by sentiment rather than the balance sheet. Whether that gap closes depends less on investor mood than on something airlines have never fully controlled: the price of jet fuel.