United Airlines' Q2 Earnings Fly Over Estimates, But Q3 Forecast Downs Stock

United Continental Holdings Inc UAL has had quite the year from a PR perspective, facing some difficult highly public incidents that appeared to tarnish the brand, if not only temporary.

These PR disasters didn't stop the airline from delivering a significant second-quarter earnings beat on Tuesday.

Despite the post-earnings decline, Buckingham Research maintains its Buy rating and $97 price target on United Airlines, but trims its 2017 pre-tax outlook by 5 percent.

“We continue to like the stock 6-12 months out on pre-tax profit initiatives that should gain more critical mass in 2018," Buckingham analyst Daniel McKenzie wrote, "though given a RASM outlook that inflects negative in 4Q17, we wouldn’t be surprised to see some rotation in the name."

United’s third-quarter revenue and cost outlook was a called a modest disappointment, characterized as a temporary pricing disadvantage to American Airlines Group Inc AAL and excessive domestic growth. Passenger unit growth in the third quarter is a cause for concern, which weighed on the stock on Wednesday.

With the the U.S. airline industry in a post-consolidation period, United Airlines is expected to grow 6 percent domestically in the third quarter. McKenzie believes shares could be worth $125 in 1-3 years on dilutive growth that according to the firm, “management can correct."

Reputational risk expert Nir Kossovsky believes it takes 20 weeks for equity investors to recognize the magnitude of PR flubs. Shares of United are actually up following the infamous incident it experienced in April.

The stock traded down 6.2 percent at $73.98 at time of publication.

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