Delta and United Earnings Point to Less Turbulence Ahead

Key Points

• When Delta Airlines reported Q4 earnings last week, the company announced record free cash flow of $4.6 billion.
• United Airlines reported record revenue and revised earnings guidance for 2026.
• American Airlines, which reports next week, currently has a bargain forward P/E ratio of just 6.21 and is expected to grow its earnings by 31% this year.

Over the past year, airline stocks have trailed the broad market as the industry deals with elevated operating costs, economic uncertainty tamping down demand for flights, and pilot labor shortages. 

Complicating matters, the record-long government shutdown in the fall of 2025 adversely affected the U.S. Federal Aviation Administration, resulting in thousands of forced furloughs and air traffic controller shortages, with air carriers feeling the pinch. 

But based on the high-flying earnings which airlines have reported thus far in January, the transportation industry may be home to some of the best value stocks in the industrials sector, whose 6.74% gain over the past month has made it the third-best performer among all 11 S&P 500 sectors. 

Delta Air Lines Reports Record Free Cash Flow

Free cash flow may be one of the most significant measures of a company’s financial well-being. It indicates how much cash a company has generated after paying for its operating expenses and capital expenditures, and alludes to its ability to fund growth, pay debt, and reward investors into the future.

For Delta Air Lines NYSE: DAL, that future is looking brighter after the company reported record free cash flow of $4.6 billion during its full-year 2025 and Q4 earnings call on Jan. 13. The company also reported that it generated $5 billion of pre-tax profit alongside a double-digit operating margin. 

Earnings per share (EPS) of $1.55 exceeded analyst expectations of $1.53, marking the third consecutive quarter Delta has beaten on the bottom line. Meanwhile, the company’s Q4 revenue was also ahead of projections, marking the fourth consecutive top-line beat. 

Shares of DAL are trading at a forward price-to-earnings (P/E) ratio of just 9.2, which underscores why the 23 analysts covering the stock all assign it a Buy rating and a consensus 12-month price target that suggests nearly 17% potential upside. 

Delta scores higher than 99% of companies evaluated by MarketBeat, while ranking 2nd out of 133 stocks in the transportation sector. According to TradeSmith, DAL's financial health has been in the Green Zone for over eight months.

United Airlines Announces Record Revenue

Shares of United Airlines NASDAQ: UAL jumped more than 4% after the company reported full-year 2025 and Q4 earnings on Jan. 20. Since then, the air carrier’s stock has slid more than 2%, despite record revenue. 

The company boosted full-year earnings guidance for 2026.

That is the kind of confidence borne out of 14 consecutive quarterly earnings beats. 

With another comically low forward P/E ratio of 8.74, United Airlines' earnings are expected to grow 12.19% next year, from $12.96 to $14.54 per share.

That is welcome news to shareholders who have endured ​​EPS growth of -25% and 0% over the preceding two quarters. 

CEO Scott Kirby noted in his earnings call comments that the company’s ability to “grow EPS year-over-year despite all the headwinds … sets up [2026] as more of the same at United, but with a much better industry backdrop.”

UAL has also found itself in the TradeSmith Green Zone for over eight months, with 15 of 17 analysts covering the stock assigning it a Buy rating.  UAL carries a 12-month price target around $135, or nearly 23% potential upside from current prices.

American Airlines’ Earnings Are on Deck 

Despite not reporting until Jan. 27, American Airlines NASDAQ: AAL could join Delta and United if it posts strong full-year 2025 and Q4 results on Tuesday. Meanwhile, the stock has already gained nearly 23% since its three-month low on Nov. 20. 

While analysts are expecting negative earnings (-17 cents), perhaps the most compelling case for adding a position in AAL is that, with a trailing EPS of 86 and an absurdly cheap forward price-to-earnings (P/E) ratio of 6.21, American Airlines’ earnings are expected to grow nearly 31% next year, increasing from $2.42 to $3.16 per share.

Wall Street is less bullish on AAL. The stock receives a consensus Hold rating. Of the 17 analysts covering American Airlines, eight assign it a Buy rating, seven assign it a Hold, and two assign it a Sell.

Still, their average 12-month price target of about $17 implies more than 17% potential upside. 

Like Delta and United, American Airlines also falls into TradeSmith’s Green Zone for financial health, where it has been for more than six months.