Dahlman Rose Comments On Pinnacle Airlines Following Disappointing Earnings

Pinnacle Airlines PNCL reported disappointing 1Q11 earnings, as bad weather and higher pilot costs associated with a new contract had a major negative impact on revenues. Dahlman Rose is maintaining a Hold rating and cautious outlook on the shares. Dahlman Rose is estimating 2011 EPS of $0.83, down from $1.06 last year, due to weak 1Q11 results, down 2Q11 results and a flattish 2H11. Dahlman's preliminary 2012 EPS estimate is for recovery, back to $1.10, although there is some revenue risk in the model given the company's contract with Delta Air Lines is currently in negotiation. Pinnacle reported EPS ex items of $0.01, vs. $0.09 last year, compared to Dahlman's estimate of $0.02 and the consensus estimate of $0.03. Pinnacle pre-released earnings last week; prior to the pre-announcement, the consensus EPS estimate was ~$0.10. Dahlman discusses the reasons for the poor performance below. Dahlman Rose is maintaining a Hold rating as it believes there are short-term issues associated with Pinnacle, including a difficult 2011. Dahlman Rose has a Hold rating on PNCL PNCL closed Thursday at $5.20