January 23, 2014 / 1:30 PM / in 4 years

UPDATE 2-United Continental Q4 profit tops estimates, shares sag on outlook

CHICAGO, Jan 23 (Reuters) - United Continental Holdings Inc on Thursday reported a quarterly profit that easily topped Wall Street expectations, helped by an increase in passenger travel, higher ticket prices and lower fuel costs.

However, the airlines’ view for the current quarter disappointed some analysts and shares were down about 3 percent early morning on Thursday.

United Continental said it expects unit revenue, which measures passenger revenue per available seat mile, for the current quarter to be flat to up 2 percent over last year and said consolidated capacity is expected to be up 0.3 - 1.3 percent.

Cowen & Co analyst Helane Becker said the outlook was light. Becker was expecting PRASM to be up 2.8 percent, she said in a note to clients.

“We believe the difference is likely attributed to recent winter storms negatively impacting operations at major hubs as well as continued weakness in the Pacific region,” the analyst said.

Becker also said because United has traditionally not been good at giving accurate revenue forecasts, Wall Street is likely to compare its unit revenue view to competitor Delta.

Delta forecast first quarter unit revenue to grow 2-4 percent.

“We believe United could be conservative as they attempt to regain investor confidence given the wild volatility the company showed in 2013,” she said.

The parent of United Airlines said fourth-quarter unit revenue increased 3.2 percent from last year, while a measure of passenger miles traveled also rose 2.7 percent.

United Continental, the No. 2 U.S. airline after the newly formed American Airlines Group Inc, had been underperforming the industry in key metrics like unit revenue for about a year.

But earlier this month, the carrier reported unit revenue for December rose 12.5 percent from a year earlier as the U.S. Thanksgiving holiday shifted some holiday traffic into December. That sent United stock to its highest level since late 2007.

Stephen Simpson, an individual investor who follows the airline sector, said he was being cautious about United’s stellar quarter especially since the airline had already reported a strong December.

“I‘m not saying it wasn’t a good quarter, United finally seems to be making some progress in improving margins and cutting costs, but some of the numbers are stale to begin with,” Simpson, who contributes to investment research website Seeking Alpha, said.

For the fourth quarter, the company earned $298 million or 78 cents per share, compared with a loss of $190 million, or 58 cents, last year. Taking into account merger-related charges, the company earned $140 million, or 37 cents per diluted share.

Revenue for the Chicago-based United Continental rose 7 percent to $9.3 billion.

Analysts expected the airline to earn 65 cents a share, on revenue of $9.28 billion, according to Thomson Reuters I/B/E/S.

Shares of the company fell to $48.74 in premarket trading after closing at $49.18 Wednesday on the New York Stock Exchange.

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