United Continental (UAL 78.90) had an ignominious "customer service" issue in the second quarter, but apparently the bad press coverage the airline received didn't put much of a dent in its operating performance. In reporting its second quarter results last night, the airline's president said the company's performance was "...outstanding both financially and operationally."
He has a financial point in that second quarter revenue increased 6.4% year-over-year to $10.0 billion, with consolidated passenger revenue per available seat mile (PRASM) up 2.1%. Its consolidated unit cost per available seat (CASM), meanwhile, decreased 1.0%.
PRASM was at the midpoint of the company's guidance range and a noticeable improvement from the first quarter when it was flat. The second quarter marked the first quarter of positive unit revenue growth in two years.
Excluding special charges, UAL's reported a profit of $2.75 per diluted share, up 5.4% from the same period a year ago on a comparable basis and comfortably ahead of analysts' average expectation.
Notwithstanding the positive performance in the second quarter, shares of UAL are trading 3.7% lower in pre-market action.
The hangup for many investors was UAL's third quarter guidance, which included a projection for consolidated PRASM to be down 1.0% to up 1.0% and its consolidated CASM excluding fuel, profit sharing and third-party business expenses to be up 2.0% to 3.0%. UAL is also forecasting an adjusted pre-tax margin of 12.5% to 14.5% versus an adjusted pre-tax margin of 15.7% reported for the third quarter of 2016.
UAL is also projecting consolidated capacity to increase approximately 4.0% year-over-year.
Those respective estimates are weighing on the stock, which has gained 5.0% since July 3, as well as the stocks of other airlines such as American Airlines (AAL 53.15), Southwest Airlines (LUV 61.57), and Delta (DAL 53.96), which are all down in pre-market action.
The weakness in UAL and its peers is going to be a drag on the Dow Jones Transportation Average, which will also be weighed down by the weakness in CSX Corp. (CSX 54.64) after the railroad operator reported its second quarter results.
Shares of UAL are up 8.3% year-to-date and are sitting atop their 50-day simple moving average, which is set to be violated at the start of today's trading.