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United shares slide 6% after third-quarter forecast disappoints

Key Points
  • The airline sees its pretax margins will be 12.5 percent to 14.5 percent for the third quarter.
  • This implies earnings per share of $2.73 to $3.13, according to analysts.
  • Wall Street analysts were expecting a guidance of $3.16.
Oscar Munoz, chief executive officer of United Continental Holdings
Andrew Harrer | Bloomberg | Getty Images

Shares of United Continental fell nearly 6 percent Wednesday after the airline gave third-quarter guidance that implied it may miss Wall Street's earnings estimates for the period.

The airline said it expects revenue per available seat mile (RASM) — a key metric for airlines — to range between a 1 percent decline and 1 percent growth.

"[W]e believe few were braced for a -1% to +1% outcome, which (obviously) once again raises the specter of declining RASM," JPMorgan analyst Jamie Baker said in a note Tuesday.

"But even allowing for potential conservatism, the more likely outcome in our minds is a modest softening of consensus earnings expectations," Baker said.

United said it sees its pretax margins of 12.5 to 14.5 percent for the third quarter, which implies earnings per share of $2.73 to $3.13. Wall Street analysts were expecting a bottom-line guidance of $3.16.

Baker said the range's midpoint of $2.93 "falls below all but one of the seventeen published forecasts – though United does have a tendency to establish initial guidance that it has recently been prone to exceed."

United CEO Oscar Munoz told CNBC's "Squawk Box " on Wednesday that the airline is "firmly on the right path and a quarter does not make a difference."

The airline released its third-quarter guidance Tuesday afternoon along with its second-quarter results. United posted earnings per share of $2.75 on revenue of $10 billion, topping Wall Street expectations.