Earnings Preview: Continental Airlines

Oct.20.09 | About: United Continental (UAL)

Continental Airlines (NYSE:CAL) is expected to report Q2 earnings Wednesday, October 21, with a conference call scheduled for 10:30 am ET.


Analysts are looking for EPS of (6c) on revenue of $3.32B. The consensus range is very wide at (78c)-15c for EPS, and $3.2B-$3.45B for revenue, according to First Call. Continental Airlines stated in mid October that it expects to record special charges during Q3 totaling $20M. When the company reported Q2 results, it announced it will look to cut $100M in costs, while eliminating 1,700 positions across country. Continental feels these cost cutting measures will result in $100M yearly benefits by 2010.

Analyst Views

Shares in the airline sector jumped in September after Barclays Capital stated it believes that the Street underestimates the potential for a significant airline revenue recovery and even a relatively modest recovery would pave the way for a profitable 2010 and materially higher share prices. The firm continues to favor the legacy carriers over low-fare carriers because the former have greater leverage to a recovery and relatively low expectations. In late September, Continental was upgraded to Buy from Neutral at UBS, which expects the legacy airline stocks to outperform given constrained seat capacity, manageable labor costs, and the economic recovery.