UAL underperformed the broader market
United Airlines (UAL) stock has had a rough ride so far this year. The stock has lost 1% of its value YTD (year-to-date) and has underperformed the broader market as well. The Dow Jones, the S&P 500, and the NASDAQ have gained 10.9%, 14.3%, and 17.3%, respectively, YTD.
United Airlines stock has also underperformed the iShares Transportation Average ETF (IYT), which has gained 14.7%. The ETF invests in US transportation stocks listed on the Dow Jones and has allocated 16.7% of its portfolio to the passenger airline industry. United Airlines stock has also been one of the worst performers among its peers. Delta Air Lines (DAL), JetBlue Airways (JBLU), and Southwest Airlines (LUV) have returned 9.9%, 11.2%, and 14.8%, respectively, YTD.
What’s hurting the stock?
The downside in United Airlines stock isn’t the result of any company-specific issues. The company is doing well, as was reflected in its last round of quarterly results, which it reported on April 16. The company’s first-quarter revenue and earnings both surpassed analysts’ estimates and marked impressive year-over-year improvements.
The main driver of United Airlines stock’s dismal YTD performance is investors’ concern about its premium valuation. Last year, the stock gained 24.2% and was an outperformer among its peers. It also outpaced the gains of the broader market. As a result, its valuation was higher than those of its peers.
A variety of macroeconomic factors, including trade war worries, global slowdown concerns, the government shutdown, and the worldwide grounding of Boeing’s 737 MAX planes, also kept the stock highly volatile YTD—mostly in the negative territory.