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United Continental Q3 View Upbeat Despite Fuel Cost Headwind

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United Continental Holdings, Inc. (UAL - Free Report) has provided bullish third-quarter 2018 guidance at the Cowen and Company 11th Annual Global Transportation Conference on Sep 5.

The carrier now anticipates third-quarter consolidated passenger unit revenues at the high end of the guided range of 4-6% increase. In the year-ago quarter, the metric was down 3.7% year over year.

On another positive note, the company expects its pre-tax margin excluding special charges and the mark-to-market impact of equity investments, in the high end of the earlier estimate of 8-10%. However, due to rising fuel prices, the company now expects average aircraft fuel price per gallon on the higher side of the previously projected $2.27-$2.32 range.

The impressive unit revenues and pre-tax margin predictions despite rising fuel prices certainly signify a big upside. Notably, the carrier has been making efforts to reverse the negative impact of high fuel costs. To this end, it recently increased fees for checked baggage. The carrier now charges $30 and $40 for checking the first and second bags, respectively. The earlier charges were $25 for the first bag and $35 for the second. The elevated fee structure, effective Aug 31, is applicable on flights operating on the North American, Caribbean and Central American routes.

Last month, JetBlue Airways Corporation (JBLU - Free Report) also hiked the fee for the first checked bag to $30 from the previous $25. Fees for the second and the third checked bags have also been increased. However, United Continental unlike JetBlue did not announce an increase in fees to change tickets.

Zacks Rank & Key Picks

United Continental carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are SkyWest, Inc (SKYW - Free Report) and Trinity Industries, Inc. (TRN - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of SkyWest and Trinity have rallied more than 73% and 25%, respectively, in a year.

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