Bullish on Continental Airlines (CAL)

Mar. 1.06 | About: United Continental (UAL)

Expect Continental Airlines' (ticker: CAL) results for February to show strong gains. The company has increased its estimate of quarter-end cash by $100 million. Companies don't just happen to find an extra $100 million lying around. This kind of money comes from increases in revenues, top line growth. Cost cutting has been strong at CAL but a new $100 million must surely come from revenues. The new "extra cash flow" should be cumulative.

At some point, the company will start using the extra cash to pay off debt. The payoff of debt will reduce interest costs which should further increase cash flow. A few years ago, I bought Nextel when it had a negative book value but good cash flow. The stock went from $2.90 to $28 lickity split when it started buying up its old low rated bonds at 50 cents on the dollar.

CAL 1-Yr Price Performance: