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Analysts see wider 1Q loss for United Airlines

NEW YORK (AP) -- Shares of United Airlines parent United Continental Holdings Inc. fell Monday after one analyst downgraded the stock and others panned the company's latest forecast.

Evercore Partners lowered the stock to "equal weight" from "overweight" partly because the company expects non-fuel costs to rise sharply in 2013.

Its shares fell $1.04, or 3.3 percent, to $30.97 in late afternoon trading. They are still near the high end of their 52-week range of $17.45 to $32.95.

Airline stocks have done better than the broader market in the past few months — United Continental shares were up nearly 60 percent since early December before Monday's pullback.

Investors have been betting that consolidation — most recently with the Feb. 14 announcement of a merger between American Airlines and US Airways — will boost the carriers' pricing power and lead to sustained profits. Most big U.S. airlines made money last year, although United lost $723 million on write-downs and problems integrating United and Continental computer systems.

United Continental said Thursday in a filing with the Securities and Exchange Commission that passenger revenue for each seat flown one mile, a closely watched measure of pricing power, would rise by between 5.4 percent and 6.4 percent in the first quarter.

But the company also said that first-quarter costs per mile fuel would rise by between 11.4 percent and 12.4 percent, which was an increase from the earlier forecast of increase of 8 to 9 percent.

Evercore Partners airline analyst Duane Pfennigwerth said he expected stronger revenue but a wider loss for the January-to-March quarter because of the new outlook — $1.10 per share instead of $1.06 per share.

As of the end of trading last week, analysts surveyed by FactSet expected United to post a loss of $1.01 per share in the first quarter, excluding special items.

Barclays analyst David Fintzen made an even sharper, negative change to his forecast. He said United's commentary indicated "solid near-term revenue trends, but also greater cost pressures than we'd expected."

Fintzen kept an "equal weight" rating but widened his expected first-quarter loss for United to $1.15 per share instead of 65 cents per share. But with the brighter revenue outlook, he raised his estimate of full-year profit to $4.30 per share from $3.90 per share.

Analysts Daniel McKenzie of Buckingham Research Group and Helane Becker of Cowen Securities also widened their estimates of first-quarter losses. McKenzie reduced his full-year profit forecast while Becker raised hers.

The full-year consensus prediction, as of the end of last week's trading, was for adjusted profit of $3.71 per share.