United Continental Holdings Inc. (UAL - Analyst Report) is slated to report fourth-quarter 2013 results on Jan 23, before market opens. In the last quarter, the company delivered a -7.93% earnings surprise. Let us see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that United Continental is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +25.93% for United Continental. This is a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: United Continental currently has a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks of #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings.
The combination of United Continental’s Zacks Rank #2 and +25.93% ESP makes us confident of positive earnings beat this release.
What is Driving the Better-Than-Expected Earnings?
We expect better performance from United Continental this quarter based on an improved traffic scenario, expansion of global route network through the introduction of non-stop flights and several new in-flight products and services in both domestic and international routes.
Going forward, the carrier will also benefit from its restructuring effort by cutting annual costs by $2 billion by fuel cost through more efficient planes. United Continental aims to enhance productivity by slashing sourcing cost, improving maintenance procedure and optimizing distribution channels. However, a weak cargo market, soft performance by the Asia-Pacific region and stiff competition remain the near-term impediments for the company.
Other Stocks to Consider
Here are some other companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:
JetBlue Airways Corp. (JBLU - Analyst Report) with earnings ESP of +8.33% and Zacks Rank #1 (Strong Buy).
Southwest Airlines Co. (LUV - Analyst Report) with earnings ESP of +7.14% and Zacks Rank #1 (Strong Buy).
Spirit Airlines Inc. (SAVE - Snapshot Report) with earnings ESP of +2.17% and Zacks Rank #1 (Strong Buy).