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Solid Cash Position Aids Allegiant (ALGT), High Fuel Costs Hurt

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We have recently updated a report on Allegiant Travel Company (ALGT - Free Report) .

Allegiant has a strong cash position. Cash and cash equivalent balance of $1.1 billion at the end of the third quarter is enough to meet the current debt of $140 million. The company's current ratio (a measure of liquidity) stood at 1.91 at the end of the September quarter, above the 1.54 reading at the end of the June quarter. The current ratio reading also compares favorably with the industry's 1.01. The total debt-to-total-capital ratio was 0.57 at the end of third-quarter 2021, lower than the year-ago quarter’s figure of 0.7. A lower debt-to-capitalization ratio indicates that the proportion of debt to finance the company’s assets is declining and so is the risk of insolvency.

With air-travel demand rising in the United States, the carrier issued impressive guidance for the fourth quarter of 2021 (coming out on Feb 2). For the December-end quarter, ASM (for scheduled service) is expected to increase 12-16% from fourth-quarter 2019 figures. Total system ASM is expected to surge 10-14% from the fourth-quarter 2019 figure. Total operating revenues are expected to increase 0.5-4% from fourth-quarter 2019 actuals.

Allegiant Travel's third-quarter 2021 bottom line was dented by increasing fuel price per gallon as oil prices moved north. In the third quarter, the average fuel cost per gallon (scheduled) surged 66.7% to $2.20. The metric surged 34% to $2.01 during the first nine months of 2021. We expect Allegiant’s fourth-quarter results to be dented by high fuel costs as well.

Zacks Rank & Stocks to Consider

Allegiant currently carry a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Some better-ranked stocks in the broader Zacks Transportation sector are J.B. Hunt Transport Services (JBHT - Free Report) , FedEx Corporation (FDX - Free Report) and Schneider National (SNDR - Free Report) .

The long-term expected earnings per share (three to five years) growth rate for J.B. Hunt is pegged at 15%. JBHT is benefiting from strong performances across all its segments. The Dedicated Contract Services (DCS) unit is being aided by fleet-productivity improvement and a rise in average revenue-producing trucks. The Integrated Capacity Solutions (ICS) unit is gaining from a favorable customer freight mix and higher contractual and spot rates.

JBHT’s measures to reward shareholders are encouraging. Driven by the tailwinds, the stock has increased 36.1% in the past year. J.B. Hunt currently carries a Zacks Rank #2 (Buy).

The long-term expected earnings per share (three to five years) growth rate for FedEx is pegged at 12%. FDX is benefitting from a surge in e-commerce demand amid the pandemic.

FDX exited first-quarter fiscal 2022 with cash and equivalents of $6,853 million, much higher than its current debt of $125 million. Driven by the tailwinds, the stock has moved up 2.7% in the past year. FedEx currently carries a Zacks Rank #2.

The long-term expected earnings per share (three to five years) growth rate for Schneider is pegged at 20.7%. SNDR benefits from strong performance in the Intermodal and Logistics units.

SNDR’s third-quarter cash balance is also encouraging. Driven by the tailwinds, the stock has moved up 13.7% in the past year. Schneider currently carries a Zacks Rank #2.