Back on July 8, Morgan Stanley’s John Godyn predicted that United Continental (UAL) would execute a turnaround before JetBlue (JBLU). If today’s earnings are anything to go by, that appears to be a good call.
Agence France-Presse/Getty Images Today, United Continental said it earned $2.34 a share, beating topping the Street consensus for $2.15, on sales of $10.33, narrowly beating forecasts for $10.31 billion. United Continental also said it would buy back $1 billion of its shares over the next three years. JetBlue, on the other hand, reported a profit of 19 cents share, meeting analyst forecasts, while revenue came in at $1.49 billion, below forecasts for $1.51 billion.
Shares of United Continental have gained 3.2% to $47.88 at 11:02 a.m., while JetBlue has dipped 0.3% to $11.24.
Cowen’s Helane Becker and Conor Cunningham zero in on United Continental’s third-quarter guidance:
United has historically lagged its major competitors in PRASM growth; 3Q14 could signify a turning point as management forecasts 3Q14 PRASM growth of 2% to 4%, compared to our estimate of 2% and in line with Delta’s (DAL) forecast. We consider this guide a major positive for the company as we have long been concerned about the company’s PRASM deficiencies…
In conjunction with earnings, United announced a $1 Bn (~6% of the company market cap) share repurchase program to be completed over the next three years. This announcement is two quarters earlier than our expectations. We believe the company could quickly complete this repurchase program well before the three year time frame.
United Continental has gained 15% so far in July, easily outperforming Delta’s 1.2% rise and JetBlue’s 3.7% advance.
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