Why United Continental (UAL) Is Up Today

NEW YORK (TheStreet) -- United Continental (UAL) gained 11.5% to $45.73 Thursday after the airline announced that passenger revenue per available seat mile increased between 11.5% and 12.5% in December.

The increase in PRASM is partly thanks to the 1,200 flights United canceled in December. Fewer flights reduced capacity and helped increase revenue for the airline.

In the same announcement, United said it expects fourth-quarter capacity to increase 2.6% and traffic to rise 2.6% with 82.4% of all seats filled. The airline also expects PRASM to increase between 2.8% and 3.8% from the year-earlier quarter.

TheStreet Ratings team rates UNITED CONTINENTAL HLDGS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about its recommendation:

"We rate UNITED CONTINENTAL HLDGS INC (UAL) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 4800.00% and other important driving factors, this stock has surged by 55.97% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. The net income increased by 6216.7% when compared to the same quarter one year prior, rising from $6.00 million to $379.00 million.
  • UNITED CONTINENTAL HLDGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, UNITED CONTINENTAL HLDGS INC swung to a loss, reporting -$2.32 versus $2.01 in the prior year. This year, the market expects an improvement in earnings ($2.16 versus -$2.32).
  • The gross profit margin for UNITED CONTINENTAL HLDGS INC is rather low; currently it is at 24.60%. Regardless of UAL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.70% trails the industry average.
  • Although UAL's debt-to-equity ratio of 6.98 is very high, it is currently less than that of the industry average. To add to this, UAL has a quick ratio of 0.59, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • You can view the full analysis from the report here: UAL Ratings Report

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