United Continental Holdings, Inc. UAL, the holding company of United Airlines, is scheduled to unveil its first-quarter 2015 results on Apr 23, before market opens.
Last quarter, the company had delivered a positive earnings surprise of 5.26%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that United Continental Holdings is likely to beat earnings estimates this quarter as it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP for United Continental Holdings is currently pegged at +3.55%. This is because the Most Accurate estimate of $1.46 stands above the Zacks Consensus Estimate of $1.41. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: United Continental Holdings carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
United Continental Holdings’ Zacks Rank #3 and +3.55% ESP make us reasonably confident of an earnings beat at the company.
What is Driving the Better-than-Expected Earnings?
United Continental Holdings has a healthy track record with respect to earnings – it has delivered positive earnings surprises in each of the last four quarters, with an average beat of 4.04%. We expect the company to surpass the Zacks Consensus Estimate in the first quarter as well buoyed by weak fuel prices. The company expects average price of fuel, including cash-settled hedges, in the first quarter of 2015 to be $2.12 per gallon.
Since fuel costs account for a major chunk of an airline company’s operating expenses, the drop in oil prices has significantly boosted the bottom lines of stocks in the airline space. We are also impressed by the company’s consistent efforts to improve the flying experience for its customers.
United Continental Holdings currently offers its Personal Device Entertainment on almost 200 mainline planes. Further, the carrier has started operating six flights a week from Los Angeles to Melbourne . The company is constantly introducing new flights and routes to improve customer convenience and expand further. Moreover, the company has a disciplined cost structure.
Other Stocks
Here are some companies in the transportation sector that investors may consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
Ryder System R carries a Zacks Rank #2 and an earnings ESP of +1.98%. The company will report its first-quarter results on Apr 22, before the commencement of trading.
Global Ship Lease, Inc. GSL carries a Zacks Rank #3 and has an earnings ESP of +100%. The company is scheduled to report first-quarter 2015 results on Apr 30.
GATX Corp. GMT carries a Zacks Rank #3 and has an earnings ESP of +1.85%. The company is scheduled to report first-quarter 2015 results on Apr 23, before the commencement of trading.
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