UAL shares rally on improved outlook

Shares of United Airlines parent UAL Corp. gained the most in seven months after a Lehman Brothers analyst raised his profit estimate for this quarter, saying the carrier is beating revenue and cost expectations.

Analyst Gary Chase increased his UAL earnings estimate to $1.35 a share from $1.15. In a research note today, the New York-based analyst also kept an "overweight" rating on the Elk Grove Village-based company's shares.

United, the world's second-largest airline, said last night that costs are increasing less than it expected while revenue is rising. The carrier forecast cost per seat for each mile flown this quarter to be unchanged to up 0.5 percent from a year earlier, after projecting a 1 percent boost in May. Passenger revenue on that basis will rise as much as 3.25 percent.

Shares of UAL rose $2.21 to $37.54 in late morning trading on the Nasdaq, after gaining as much as 7.9 percent to $38.13. They have declined 15 percent this year, valuing the company at $4.35 billion.

The unit-revenue forecast "is likely to place the carrier among the top of the group, in stark contrast to its first- quarter performance," Bear Stearns analyst Frank Boroch wrote in a note to investors today. The New York-based analyst kept an "outperform" rating on UAL.

Shares of US Airways Group Inc. also rose as much as 6.9 percent after UBS raised its recommendation on the stock to "neutral" from "reduce." The stock gained $1.49 to $28.78 at 11:33 a.m. in New York Stock Exchange composite trading after climbing as high as $29.18.

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