CRT Capital Upgrades United Continental To Buy, Sees Merger Integration In 'Seventh Inning'

In a report published Monday, CRT Capital analyst Michael Derchin upgraded the rating on United Continental Holdings Inc (NYSE: UAL) from Fair Value to Buy, with a price target of $70.United Continental is focusing on improving its margins, generating more cash flows and enhancing its core earnings. "With merger integration in the seventh inning, and putting out integration "fires" mostly a thing of the past, UAL is now fully focused on margin improvement, free cash flow generation, core earnings improvement, and capacity and financial discipline, in our view," analyst Michael Derchin wrote.The company now needs to complete the negotiation of joint collective bargaining agreements with its flight attendants and technicians. United Continental is also yet to develop a new maintenance planning system.In the report CRT Capital noted that the company was proactively working on controlling its costs and enhancing revenues to improve profitability. "A recent example of UAL's proactive focus on cost control and revenue enhancement programs to improve profitability in the seasonally weak first and fourth quarters is the announced suspension of transcontinental service at New York's JFK Airport, a long-term loss operation, and redeployment of assets to its highly profitable, core Newark hub," the report added.Near-term catalysts for the company include "accelerated buy backs in the recent sharp sell-off, re-authorization of the new $1 billion share buy-back program and improving unite revenue outlook for third and fourth quarters," Derchin stated.