Earnings Preview: Continental Airlines

| About: United Continental (UAL)

Continental Airlines (NYSE:CAL) is expected to report Q2 earnings before market open on Thursday, July 17, with a conference call scheduled for 10:30 am ET.

Guidance

Analysts are looking for EPS of (52c) on revenue of $4.04B. The consensus range is ($1.00) to (24c) for EPS, and $3.95B to $4.1B for revenue, according to First Call.

On July 13, Continental announced a number of special items it recorded in Q2. The company announced one-off gains and losses will result in an after-tax gain of $22M on special items. Continental recorded an operating special charge of $58M, mainly representing impairment charges recorded for owned aircraft and related spare parts. The company also recognised a gain of $78M following the sale of its shares in Panama's Copa Holdings S.A. (NYSE:CPA), which owns Copa Airlines and AeroRepublica.

Since the beginning of the year, there had been speculation that Continental would merge with another airline due to the slowing economy and rising fuel costs. In mid April, the company seemed set to merge with United Airlines (UAUA), but on April 27, Continental Airlines released a statement to its employees from its CEO and its president that the board had unanimously supported management's recommendation that the best course for the company was to not merge with another airline, based on the current industry environment.

Analyst Views

Continental was included in Merrill Lynch and Soleil Securities' downgrading of the airline sector in May. Merrill Lynch downgraded Continental, Delta (NYSE:DAL), AMR Corporation (AMR), US Airways Group (LCC) and UAL Corporation (UAUA) to Neutral from Buy, citing earnings risk this year from higher energy costs, Soleil downgraded the sector to Neutral from Outperform on liquidity concerns stemming from the rise in oil prices. Soleil also downgraded the company itself to Hold from Buy based on the same liquidity concerns.

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