Deutsche Bank's Michael Linenberg Upgrades United, Sees 27% Upside

In a report published Friday, Deutsche Bank analyst Michael Linenberg upgraded the rating on

to Buy, while raising the price target from $63 to $72. The analyst believes that the outlook for the company is positive and that there is 27 percent upside potential to the stock. The company reported its June quarter results with record quarterly profit, capacity cut, decrease in the pension deficit to $1 billion. United Continental also announced a new share buyback program that is triple the size of the previous one. The company appears on track to meeting its $1 billion cost reduction goal by year end 2016. In addition, the pretax margin guidance for the September quarter implies meaningful upside to the 2015 EPS. However, despite this positive news, the stock has declined 0.7 percent. "Management made great strides in improving United's credit profile over the past several years," analyst Linenberg said, adding, "United's positive credit actions have not gone unnoticed by the market; in June, S&P raised United's corporate credit rating to BB- from B+ while Moody's upgraded the company's Corporate Family Rating to Ba3 from B1." The EPS estimate for 2015 has been raised from $10.05 to $11.10, following the June quarter beat and expectations of improving cost trends in 2H15. The EPS estimate for 2016 has been raised from $10.75 to $11.15, "to reflect greater progress on its cost reduction initiatives than previously projected," the Deutsche Bank report stated.