United Continental Holdings Inc. dodged Wall Street’s questions on how it would get its turnaround back on track next year, drawing fire from analysts and sending shares reeling.
After issuing an underwhelming profit forecast for the current quarter, Chief Executive Officer Oscar Munoz faced a tense call with analysts looking for answers. They questioned the company’s projections and repeatedly asked about 2018 expansion plans after this year’s rapid growth added to pressure on fares.
“I don’t think those numbers mean very much to anyone anymore,” Citigroup Inc. analyst Kevin Crissey said. Added Brandon Oglenski of Barclays Plc, “What is it that happened this year that we didn’t anticipate at the investor day last year?”
The tensions raised the pressure on Munoz, who has been under fire this year for fighting a price war with discounters, bobbling the rollout of a no-frills product offering and mishandling the response when a passenger was dragged off a plane in April — an incident that tarnished United’s brand. Now the lack of clarity on next year’s plans is denting faith in the CEO’s efforts to improve service and juice profits at the longtime laggard in the airline industry.
“When I look at your absolute earnings, they’re down more than your competitors,” Oglenski said on the call. “Your relative margin gap is widening, not narrowing. And more importantly for the investors on this call, the stock is now down let’s call it 20 to 25 percent, versus the market this year.”
The shares tumbled 10 percent to $60.96 at 12:20 p.m. in New York, the sharpest decline in the S&P 500 Index. United earlier dropped as much as 12 percent for the biggest intraday drop since April 2016. The stock was down 6.7 percent this year through Wednesday.
“I think the conundrum is how do we give you a sense of the results of these long-tailed initiatives and provide you a little bit better transparency?” Munoz said on the call. “So it’s a good point.”
The forecast for a pretax profit margin of no more than 5 percent this quarter means United will fall further behind industry leader Delta Air Lines Inc., according to JPMorgan Chase & Co.
