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United Gives Investors Little Reason to Believe in Recovery

Shares of United Continental (UAL - Get Report) are a relative bargain thanks to its rivals, assuming investors believe the worst is behind UAL and operations are on the mend. Alas, coming out of Thursday's earnings release and conference call, few appear willing to make that bet.

United Continental shares traded down 11%, or $6.65 per share, on Thursday afternoon despite reporting adjusted earnings of $435 million in the first quarter, or $1.23 per share, topping estimates. Investors ignored the earnings beat and focused on the airline's forecast that passenger revenue per available seat mile, a common industry metric, would continue to plummet in the months to come due to declining foreign demand and increasing competition domestically.

All airlines are fighting PRASM issues, but rival Delta Air Lines (DAL - Get Report) told investors last week that it believes it can stabilize operations in the second quarter. United offered no such optimism, projecting PRASM to fall 6.5% to 8.5% in the second quarter after declining 7.4% in the recently completed quarter.

United has been largely a laggard since its 2010 merger with Continental Airlines Inc., but the company is now trying to make investors believe that...