Shares of United Continental Holdings Inc. (UAL) hit a new 52-week high of $67.77 on Dec 31, 2014. However, the company ended the day’s trading a trifle lower at $66.89, reflecting a solid 77% return over the past 12 months.
Moreover, so far this year, the stock has moved up around 77%, driven by robust financial numbers. United Continental has delivered positive earnings surprises over the trailing four quarters, with an average beat of 6.4%, including a positive surprise of 1.9% in the third quarter of 2014.
Growth Drivers
Shares have been on an upswing ever since United Continental announced its plans to initiate non-stop flights between Chicago and Rome starting summer 2015. The carrier thus continues to expand its Trans Atlantic and Pacific routes by initiating new flights in the regions, to capitalize on the growing travel demand in the European sub-continent.
In addition, United Continental plans to boost its summer 2015 itinerary with flights between Washington Dulles and Paris and between New York and Venice. It has initiated flights between San Francisco and Tokyo's Haneda Airport. It has also connected Los Angeles and Melbourne with non-stop six daily flights per week, starting Oct 2014.
Also, United Continental is well poised to gain from the decline in crude oil prices as oil costs account for nearly 30% of its operating expenditure. Moreover, replacing older planes in its fleet with new fuel-efficient ones will likely boost operating margin for the company.
Robust Third-Quarter Earnings
On Oct 23, 2014, United Continental posted its third-quarter 2014 numbers. Adjusted earnings of $2.75 per share were ahead of the Zacks Consensus Estimate of $2.70. The results improved substantially from earnings of $2.37 per share in the comparable prior-year period.
Estimate Revisions Reflect Strength
Despite the strong price appreciation, the stock has room for plenty of upside, given the positive estimate revisions witnessed over the past 30 days. In the last 30 days, for 2014, the company has witnessed five upward revisions with the Zacks Consensus Estimate for earnings moving up from $4.97 to $5.06. The Zacks Consensus Estimate for fourth-quarter 2014 is pegged at $1.18, representing robust year-over-year growth of 50.80%.
Other Stocks to Consider
United Continental currently holds a Zacks Rank #1 (Strong Buy). Apart from United Continental, investors interested in the airline sector may also consider stocks like Southwest Airlines (LUV), Delta Air Lines (DAL) and Ryanair Holdings (RYAAY). All the three stocks sport the same Zacks Rank as United Continental.
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