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'Behold the Power of Lower Fuel' for United Continental: Analyst

CHICAGO ( TheStreet) -- Analysts were boosting estimates for United Continental Holdings (UAL - Get Report) Friday based on the carrier's lower fuel costs.

But the company's guidance, reported late Thursday, also included relatively low second-quarter gains in passenger revenue per available seat mile of between 3.2% and 4.2%. Apparently as a result, while most airline shares were on the rise, United shares were down five cents to $24.20.

Following the guidance, Dahlman Rose analyst Helane Becker raised her second-quarter estimate to earnings of $1.61 per share. The average estimate of analysts surveyed by Thomson Reuters is currently calling for a profit of $1.71 a share.

Also on Friday, JPMorgan analyst Jamie Baker lifted his third-quarter estimate to earnings of $2.80 per share vs. the current consensus view for a profit of $2.62 a share. For full-year 2012, Dahlman's Becker raised her estimate to earnings of $4 per share, which is still below the average analysts' estimate for a profit of $4.34 a share.

JPMorgan's Baker has a 12-month price target of $40, while Dahlman's Becker has a price target of $27.

JPMorgan's Baker wrote that he expects seasonal second-half declines in traffic, which would lead to slight third and fourth quarter revenue per available seat mile gains of 2.3% and 2.4% respectively, compared with 4% in the second quarter.

"We believe our UAL RASM estimates represent Street-low expectations at least for now, and yet our earnings estimates top those of consensus," he said, noting: "Behold the power of lower fuel."

In a report issued Thursday, Wolfe Trahan analyst Hunter Keay called lower fuel prices "impossible to ignore" and said he was lowering fuel price assumptions for all carriers. Keay also reduced PRASM growth estimates because "it is reasonable to assume airlines will trim fares in a declining fuel price environment." The intent, he said, should be to raise margins and pass through costs, a task that does not necessarily depend upon maintaining high ticket prices.

Keay has outperform ratings on Delta (DAL - Get Report) and US Airways (LCC).

Shares of United are up 3 cents to $24.28 in afternoon action.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

>To follow the writer on Twitter, go to

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