11:29 AM EDT, 10/17/2024 (MT Newswires) -- United Airlines' (UAL) revenue per available seat mile, or RASM, is projected to exceed its cost per available seat mile, or CASM, in 2025, Morgan Stanley said in a report Thursday.

"RASM ahead of CASM in 2025, aggressive balance sheet actions and other initiatives set up 2025 very well though this still far from being priced in," Morgan Stanley said, adding that UAL management expects RASM to exceed CASM multiplied by fuel costs in 2025, which is "encouraging" given a favorable cost and jet fuel environment.

Morgan Stanley projects United Airlines' normalized earnings per share to be in the low-to-mid-teens for 2025 to 2026, indicating the stock is still trading at around a 5x price-to-earnings ratio despite recent gains, the report said.

United Airlines' Q3 results suggest a shift from a defensive to an offensive strategy in the post-pandemic landscape. The strong performance was driven by better-than-expected margins, with revenues up 2.5% year-over-year, supported by a 4% increase in capacity, the report said.

The company's management is optimistic about long-term growth in international long-haul flights and expects improvements in Latin America due to capacity reductions by low-cost carriers.

Morgan Stanley maintained an overweight rating on United Airlines and raised its price target to $88 from $80.

Shares of United Airlines were up 2.8% in recent Thursday trading.

Price: 73.51, Change: +1.50, Percent Change: +2.08