How Will United Continental (UAL) Stock React to This Justice Department Settlement?

NEW YORK (TheStreet) -- United Continental Holdings Inc. (UAL) has reached a settlement with the Justice Department regarding an immigration related claim, alleging the company discriminated against employees on the basis of their citizenship status, the Wall Street Journal reports.

The complaint alleges that United Continental required employees with a "permanent resident" status, and not employees that are U.S. citizens, to fill out additional forms, and show additional proof of their employment eligibility after they were hired, the Journal added.

In order to settle the dispute the airline company agreed to pay $215,000 to the government, and a $55,000 back pay fund to compensate employees that might have lost pay as a result of the company's actions. United Continental will also undergo a two year period, during which time its employment eligibility verification practices will be monitored, the Journal noted.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

"This was an administrative error, with no discriminatory intent and no employees were adversely impacted," a spokesperson for United Continental told the Journal.

 Shares of United Continental are up 1.17% to $48.35 in late morning trading on Tuesday.

Separately, TheStreet Ratings team rates UNITED CONTINENTAL HLDGS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate UNITED CONTINENTAL HLDGS INC (UAL) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, notable return on equity, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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

  • UNITED CONTINENTAL HLDGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, UNITED CONTINENTAL HLDGS INC turned its bottom line around by earning $1.30 versus -$2.32 in the prior year. This year, the market expects an improvement in earnings ($4.60 versus $1.30).
  • The revenue growth significantly trails the industry average of 47.5%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Airlines industry and the overall market on the basis of return on equity, UNITED CONTINENTAL HLDGS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Powered by its strong earnings growth of 66.11% and other important driving factors, this stock has surged by 49.93% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Net operating cash flow has increased to $1,464.00 million or 27.52% when compared to the same quarter last year. Despite an increase in cash flow, UNITED CONTINENTAL HLDGS INC's cash flow growth rate is still lower than the industry average growth rate of 73.47%.
  • You can view the full analysis from the report here: UAL Ratings Report

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