The Zacks Analyst Blog Highlights: United Continental Holdings, Delta Air Lines, AMR Corporation, GlaxoSmithKline and Valeant Pharmaceuticals

For Immediate Release

Chicago, IL – April 26, 2011 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: United Continental Holdings Inc. (UAL - Analyst Report), Delta Air Lines Inc. (DAL - Analyst Report), AMR Corporation (AMR), GlaxoSmithKline (GSK - Analyst Report) and Valeant Pharmaceuticals (VRX).

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Here are highlights from Monday’s Analyst Blog:

Fare Hike Narrows Loss at United

The largest U.S. airline United Continental Holdings Inc. (UAL - Analyst Report) reported first quarter 2011 adjusted loss of 41 cents per share outpacing the Zacks Consensus Estimate by 4 cents. Adjusted earnings showed a substantial 29.3% increase from a loss of 58 cents in the year-ago quarter. Despite higher fuel prices and capacity cuts, earnings improved on increased fares and extra fees.

Adjusted earnings exclude $77 million of special items pertaining to merger-related costs and other one-time charges.

Revenue

Total revenue climbed 10.8% year over year to $8.2 billion in the reported quarter and was ahead of the Zacks Consensus Estimate of $8.195 billion driven by higher ticket prices and continued growth in ancillary revenue. On an annualized basis, Passenger, Cargo and Other revenues showed increases of 11.5%, 9.3% and 5.2%, respectively.

Airlines traffic, measured in revenue passenger miles, dropped 1% year over year while capacity or available seat miles grew 1.4%. Traffic slowed slightly in the first quarter due to lower demand caused by the March 11 disaster in Japan. Load factor (percentage of seats filled with passengers) declined 200 basis points year over year to 78%.

Operating Expenses

Total operating expenses, excluding special items, increased 10.2% year over year in the reported quarter. Steeper expenses were largely due to a 34.5% year-over-year rise in fuel price, excluding the impact of hedges.

Consolidated unit cost or cost per available seat mile (CASM), excluding fuel and special items, upped 2.2% year over year. CASM, including fuel and special items, grew 9.6% from the year-ago quarter.

Liquidity

The company ended the first quarter with cash equivalents including short-term investments of $8.9 billion. United Continental generated operating cash flow of approximately $1 billion and spent approximately $268 million during the reported quarter.

Outlook

In order to counter rising fuel prices, United Continental Holdings plans to cut its capacityapproximately by 1% in May and 4% in September. Further, in a move to control the situation in Japan, United Continental is expected to slash 14% of its Japanese capacity in May. For fiscal 2011, the company expects capacity to be flat year over year.

Our Analysis

Despite the company’s healthy balance sheet, merger synergies as well as solid growth prospects, we believe reduced capacity will hurt United Continental’s profitability throughout the year. We remain concerned about the airline sector as a whole due to the escalating fuel prices and disaster in Japan that is expected tostall the ongoing recovery of the U.S. airlines.

United Continental is cutting its capacity more than its rivals Delta Air Lines Inc. (DAL - Analyst Report) and American Airlines, a wholly owned subsidiary of AMR Corporation (AMR), to combat the difficult situation arising from the Japan crisis as well as high fuel prices. Further, high unionization, competitive threats and integration of Continental Airlines with United might pose major risks to the company’s profitability going forward.

Hence, we are currently maintaining our long-term Underperform recommendation on United Continental, supported by the Zacks # 4 (Sell) Rank.

Glaxo & Valeant Respond to CRL

GlaxoSmithKline (GSK - Analyst Report) and Valeant Pharmaceuticals (VRX) recently submitted a response to the Complete Response Letter (CRL) received from the US Food and Drug Administration (FDA) for their epilepsy candidate, ezogabine.

The CRL, which was issued in Nov 2010, was for non-clinical reasons. We note that earlier, in August 2010, Glaxo and Valeant had received a positive recommendation from an FDA advisory panel regarding ezogabine. The FDA’s Peripheral and Central Nervous System Drugs Advisory Committee had reviewed the safety and efficacy of the drug and voted unanimously in favor of ezogabine’s efficacy for the treatment of partial-onset seizures in adults where other treatments failed. However, later during the month, the FDA extended the review date for the candidate by three months.

Approved in the EU

Meanwhile, Glaxo and Valeant announced that the candidate received marketing approval in the EU in March 2011 under the trade name Trobalt. Glaxo and Valeant received marketing authorization for the use of Trobalt as an add-on treatment of partial onset seizures, with or without secondary generalization, in adults aged 18 years and above with epilepsy.

Approval was granted on the basis of data from two pivotal phase III studies, RESTORE 1 and 2, and one phase IIb study, Study 205. Results from these studies showed a 50% or more reduction in the frequency of seizures in patients being treated with Trobalt compared to patients on placebo.

The EU approval didn’t come as a surprise as earlier this year, the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) had recommended the approval of Trobalt. Glaxo and Valeant had submitted the Marketing Authorization Application (MAA) for Trobalt to the EMA in November 2009.

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