United Continental Earnings Fall Short Amid Fleet Update

United Continental Holdings Inc. (NYSE: UAL) reported its fourth-quarter financial results before the markets opened on Thursday. The company posted $2.54 in earnings per share (EPS) on $9.0 billion in revenue. That compared to consensus estimates from Thomson Reuters of $2.59 in EPS on revenue of $9.08 billion. In the same period of the previous year, the airline operator posted EPS of $1.20 and $9.31 billion in revenue.

Perhaps one of the largest announcements in this earnings report was an agreement to acquire 40 new Boeing 737-700 aircraft, which will enter the fleet beginning in mid-2017, replacing a portion of the capacity currently operated by regional partners.

Fourth-quarter 2015 consolidated passenger revenues per available seat mile (PRASM) decreased 6.0% and consolidated yield decreased 7.2% compared to the comparable period last year.

This report might be considered incomplete because no guidance was issued for the first quarter of 2016 or even the 2016 full year. The consensus estimates for the first quarter call for $1.22 in EPS on $8.47 billion in revenue.

The company generated $1.1 billion in operating cash flow and $324 million in free cash flow in the most recent quarter.
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Brett J. Hart, United’s acting CEO, commented on earnings:

We improved our operational performance, continued to invest in our products and services and achieved record financial performance. We have great momentum as we head into 2016 and are committed to continuously earning the trust of our customers and employees. I’m proud of what we accomplished together, running a reliable airline and making the right investments to deliver shareholder value. We expect first-quarter pre-tax margin to be between 8 and 10 percent, excluding special items.

Shares of United closed Wednesday at $45.12, with a consensus analyst price target of $79.64 and a 52-week trading range of $42.17 to $74.52. Following the release of the earnings report, the stock fell 0.8% at $44.75 in early trading indications Thursday.