UAL Corp. Misses Zacks Estimate

UAL Corporation (UAUA - Analyst Report) posted a first quarter loss of $4.00 per share before nonrecurring items, up from a $4.38 loss per share in the year-ago quarter, and compares to a consensus loss of $4.45 per share and our estimate of a loss of $2.41 per share.

The shortfall from our estimate largely reflects a worse-than-expected decline in revenues, which fell 22% year over year to $3.7 billion on a 15.1% decline in mainline revenue passenger miles and a 10.4% decline in yield. In addition, cargo revenues dropped 43% year over year due to weak demand in Asia.

UAUA was able to offset much of this by a $1.1 billion fall in operating expenses, about two-thirds of which related to fuel. The non-fuel operating expense portion matched the decline in capacity.

Positively, UAUA added over $400 million in cash in several financing transactions, and ended the quarter with a total cash balance of $2.7 billion.

For 2009, we are cutting our diluted estimate to a loss of $1.50 per share from earnings of $0.75 per share due to the first quarter shortfall and a reduction in our revenue estimates as they have been disproportionately hurt by the decline in premium and business demand. We expect results to benefit from capacity cuts and lower fuel costs. However, we are increasingly concerned about the impact of competitive pricing pressures on the bottom line.

Our initial estimate for 2010 is $1.75.

We have a Hold recommendation on UAUA and note that the current Zacks rank is 3, indicating no clear directional pressure on the share price over the near term. UAUA shares fell almost 7% from yesterday’s closing price of $6.63.