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Why Is Allegiant Travel (ALGT) Up 11.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Allegiant Travel (ALGT - Free Report) . Shares have added about 11.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Allegiant Travel due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Allegiant  Reports Narrower-Than-Expected Loss in Q4

Allegiant incurred a loss (excluding 67 cents from non-recurring items) of $1.12 per share, narrower than the Zacks Consensus Estimate of a loss of $2.44. Results were hurt by coronavirus-induced weakness in air-travel demand. However, sentiments were bullish in the year-ago quarter when the company delivered earnings of $3.72 per share on strong air-travel demand.

Moreover, operating revenues of $246.6 million plunged 46.5% year over year but surpassed the Zacks Consensus Estimate of $239.6 million. The downside was due to 46.1% fall in passenger revenues, which accounted for bulk (91.2%) of the top line.

Quarter in Details

Air traffic (measured in revenue passenger miles or RPMs) for scheduled service declined 38.9% in the quarter under review. Capacity (measured in available seat miles or ASMs) declined 13.9% year over year. Consequently, load factor (percentage of seats filled by passengers) deteriorated 2390 basis points to 58.2% in the reported quarter as traffic plunge outweighed capacity contraction.

Operating cost per available seat miles (CASM) excluding fuel dipped 2.8% year over year. Average fuel cost per gallon (scheduled) declined 35.8% to $1.40 in the quarter. Moreover, total scheduled service passenger revenue per available seat miles (TRASM) fell 36.9% to 7.30 cents.

Liquidity

As of Dec 31, 2020, Allegiant Travel’s unrestricted cash and investments totalled $685.3 million compared with $473.3 million at the end of December 2019. Long-term debt and finance lease obligations (net of current maturities and related costs) came in at $1,441.8 million, up 15.5% from 2019-end levels.

Q1 Expectations

Allegiant expects earnings per share to be positive in the first quarter of 2021. Net debt after each quarter end of 2021 is expected to be less than year-end 2019.

For first-quarter 2021, CASM is expected to be down between 4% and 5% from first-quarter 2019’s levels. ASM (for scheduled service as well as system wide) are expected between +0.5% and +5.5% compared with first-quarter 2019 figures.

2021 Expectations

Full year 2021 total capex is expected to be approximately $200 million, majorly driven by aircraft acquisitions. Additionally, total debt payments are expected to be nearly $225 million ($175 million in scheduled principal payments with the remaining being interest). Interest expenses are expected in the range of $50-$55 million.


 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -73.9% due to these changes.

VGM Scores

Currently, Allegiant Travel has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Allegiant Travel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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