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Here's Why You Should Retain Allegiant (ALGT) Stock Now

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Allegiant Travel Company‘s (ALGT - Free Report) shares have rallied 44% in the past year compared with 27.5% growth of the industry it belongs to.

Zacks Investment Research
Image Source: Zacks Investment Research

The company’s earnings are anticipated to register growth of more than 100% in 2021 and 2022. Moreover, sales are expected to register growth of 72.4% and 30.9%, in 2021 and 2022, respectively. The carrier has a trailing four-quarter earnings surprise of 17.3%, on average (including one miss and three beats).

Key Growth Drivers

Management gave an impressive guidance for the third quarter of 2021. For the September-end quarter, ASM (for scheduled service as well as total system) are expected to increase between 16% and 20% from third-quarter 2019 figures. Total operating revenues are expected to go up 3.5-7.5% from third-quarter 2019 actuals.

Allegiant’s performance with respect to TRASM, a key measure of unit revenues, is improving. In the first half of 2021, this key metric (scheduled) increased 3.3% year over year to 8.75 cents. The upside was primarily led by rise in departures (up 38.7%) and block hours (up 37.4%) in the said time frame.

Primary Concern

Rising fuel cost is hurting bottom-line growth. Average fuel cost per gallon (scheduled) rose 20% to $1.92 in the first six months of 2021. With expenses on aircraft fuel increasing 65.5% in the said time frame, fuel gallons consumed (scheduled) surged 37.2% in the first half of 2021 due to improvement in air-travel demand.

Zacks Rank & Stocks to Consider

Allegiant currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. (KNX - Free Report) , Landstar System, Inc. (LSTR - Free Report) and Herc Holdings Inc. (HRI - Free Report) . Knight-Swift and Landstar carry a Zacks Rank #2 (Buy), while Herc Holdings sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for Knight-Swift, Landstar and Herc Holdings is pegged at 15%, 12% and 49.2%, respectively.