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Mesa Air Group (MESA - Free Report) operates as a holding company for Mesa Airlines, which provides flight carrier services via purchase agreements with American Airlines as well as United Airlines. The airliner offers passenger transportation and regional air services. MESA also engages in leasing aircrafts to third parties. Mesa Air Group was founded in 1982 and is based out of Phoenix, AZ.
The Zacks Rundown
MESA, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Transportation – Airline industry group, which is ranked in the bottom 2% of all 254 industry groups. As such, we expect this industry group to underperform the market over the next three to six months. This industry group is part of the Zacks Transportation sector, which is ranked dead last out of all 16 Zacks sectors.
As a general rule of thumb, we want to target stocks in the top-performing industries as historical research has shown that roughly half of a stock’s future price appreciation is due to its industry grouping. We therefore want to avoid stocks in the bottom 50% of all Zacks Ranked Industries. Candidates in the worst-performing industry groups and sectors can often represent good shorting opportunities, as their industry performance provides a headwind to any potential rally attempts.
Recent Earnings and Future Estimates
MESA has been experiencing a streak of earnings disappointments, missing estimates in each of the past two quarters. In fiscal Q4, MESA reported EPS of $-0.06, missing the Zacks Consensus Estimate of $0.12 by -150%.
For the most recent quarter (fiscal Q1 ’22), analysts have drastically reduced their earnings estimates as of late. The Zacks Consensus Estimate is now $-0.08, reflecting a -140% drop in just the past 60 days. A variety of deterrents including the Omicron variant likely contributed to the steep decline. This would translate to a reduction in quarterly EPS of -122.22% relative to the same quarter in the prior year. MESA is scheduled to report these quarterly results this Wednesday, February 9th.
The picture doesn’t improve for the regional airline carrier as we zoom out and view 2022 annual EPS estimates, which also have witnessed a substantial fall of -91.43% over the past 60 days. Analysts are now anticipating a regression in EPS of -85.94% to $0.09 versus last year. Consensus estimates are falling across the board along with the stock. Declining earnings estimates a good sign for the bears:
Image Source: Zacks Investment Research
Technical Outlook
As we can see below, MESA is in a sustained downtrend. Note how the stock has plunged below all of the moving averages and is making a series of lower lows. It’s also important to point out that all of the moving averages have rolled over and are sloping downward, the opposite of what the bulls would like to see:
Image Source: TradingView, Zacks Investment Research
The stock is down nearly 34% over the past year and is showing no signs of a reversal. MESA has continued its downward trend, falling nearly 15% to kick off the new year. Even with the recent price decline, the stock is still relatively overvalued based on a forward P/E of 58.47.
Final Thoughts
Our Zacks Style Scores illustrate a deteriorating investment picture for MESA, as the company is rated a worst possible ‘F’ in Momentum and has an overall ‘D’ VGM score. Recent earnings misses and declining future estimates signal more trouble on the horizon. The fact that MESA is included in a bottom-performing industry group and worst-possible sector simply adds to the growing list of concerns. Investors will want to steer clear of an overvalued MESA until the situation shows major signs of improvement.
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Bear of the Day: Mesa Air Group, Inc. (MESA)
Mesa Air Group (MESA - Free Report) operates as a holding company for Mesa Airlines, which provides flight carrier services via purchase agreements with American Airlines as well as United Airlines. The airliner offers passenger transportation and regional air services. MESA also engages in leasing aircrafts to third parties. Mesa Air Group was founded in 1982 and is based out of Phoenix, AZ.
The Zacks Rundown
MESA, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Transportation – Airline industry group, which is ranked in the bottom 2% of all 254 industry groups. As such, we expect this industry group to underperform the market over the next three to six months. This industry group is part of the Zacks Transportation sector, which is ranked dead last out of all 16 Zacks sectors.
As a general rule of thumb, we want to target stocks in the top-performing industries as historical research has shown that roughly half of a stock’s future price appreciation is due to its industry grouping. We therefore want to avoid stocks in the bottom 50% of all Zacks Ranked Industries. Candidates in the worst-performing industry groups and sectors can often represent good shorting opportunities, as their industry performance provides a headwind to any potential rally attempts.
Recent Earnings and Future Estimates
MESA has been experiencing a streak of earnings disappointments, missing estimates in each of the past two quarters. In fiscal Q4, MESA reported EPS of $-0.06, missing the Zacks Consensus Estimate of $0.12 by -150%.
For the most recent quarter (fiscal Q1 ’22), analysts have drastically reduced their earnings estimates as of late. The Zacks Consensus Estimate is now $-0.08, reflecting a -140% drop in just the past 60 days. A variety of deterrents including the Omicron variant likely contributed to the steep decline. This would translate to a reduction in quarterly EPS of -122.22% relative to the same quarter in the prior year. MESA is scheduled to report these quarterly results this Wednesday, February 9th.
The picture doesn’t improve for the regional airline carrier as we zoom out and view 2022 annual EPS estimates, which also have witnessed a substantial fall of -91.43% over the past 60 days. Analysts are now anticipating a regression in EPS of -85.94% to $0.09 versus last year. Consensus estimates are falling across the board along with the stock. Declining earnings estimates a good sign for the bears:
Technical Outlook
As we can see below, MESA is in a sustained downtrend. Note how the stock has plunged below all of the moving averages and is making a series of lower lows. It’s also important to point out that all of the moving averages have rolled over and are sloping downward, the opposite of what the bulls would like to see:
The stock is down nearly 34% over the past year and is showing no signs of a reversal. MESA has continued its downward trend, falling nearly 15% to kick off the new year. Even with the recent price decline, the stock is still relatively overvalued based on a forward P/E of 58.47.
Final Thoughts
Our Zacks Style Scores illustrate a deteriorating investment picture for MESA, as the company is rated a worst possible ‘F’ in Momentum and has an overall ‘D’ VGM score. Recent earnings misses and declining future estimates signal more trouble on the horizon. The fact that MESA is included in a bottom-performing industry group and worst-possible sector simply adds to the growing list of concerns. Investors will want to steer clear of an overvalued MESA until the situation shows major signs of improvement.