Why United Continental Holdings Inc Stock Took Off Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of United Continental Holdings ended the trading day with a 12.7% pop after the company reported strong second-quarter passenger revenue per available seat-mile (PRASM) growth for its second quarter.

So what: United Continental recently projected that PRASM would grow in the 1% to 3% range for the second quarter, but it announced today that the metric had grown 3.5%, beyond expectations. The company's non-fuel costs also remained flat for the quarter, which is certainly better than cost growth in the 1.25% to 2.25% range, which had been forecast earlier this year. United's available seat-miles also grew slightly, by 0.8%.

Now what: In the more than eight years since United Airlines exited bankruptcy (United offered its stock to effect the merger with Continental, making the combination technically an acquisition), its shares have only gained more than today's 12.7% 30 times, and all but one of those trading days occurred during the tumult of the global financial crisis. By that measure, today is clearly a momentous day for United Continental; but does a slight uptick in the airline's core top-line metric really justify double-digit gains today?

Before the pop, United Continental's shares had nearly returned to even for the year after slipping from year-to-date gains of 25%. It's been an erratic year for airline stocks, in general, and many of United Continental's peers reacted favorably to the news on what was otherwise a lousy day on the markets. But this is still just a short-term reaction to a long-term story, which has played out amid a historically strong economic environment for airlines. With United Continental shareholders already holding a double for the past two years despite flat revenue  and weaker earnings per share than what was reported two years ago, it may be time to consider taking some profit before valuation pressures take this high-flying stock back down to the runway.

Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash cow. While Buffett shakes in his billionaire boots, only a few investors are embracing this new market, which experts say will be worth more than $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping into one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

The article Why United Continental Holdings Inc Stock Took Off Today originally appeared on Fool.com.

Alex Planes has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story