A month has gone by since the last earnings report for Allegiant Travel (ALGT Quick QuoteALGT - Free Report) . Shares have lost about 7.4% in that time frame, underperforming the S&P 500.

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

Allegiant Q4 Earnings Beat Estimates

Allegiant's earnings (excluding 59 cents from non-recurring items) of $1.18 per share surpassed the Zacks Consensus Estimate of $1.13 per share. Sentiments regarding air-travel demand are bullish now (due to increased inoculation programs) compared with the year-ago quarter, when the company reported a loss of $1.12 per share.

Operating revenues of $496.9 million beat the Zacks Consensus Estimate of $475.3 million and increased more than 100% on a year-over-year basis.

Quarter in Details

Passenger revenues, which accounted for a bulk (91.4%) of the top line, surged more than 100% on a year-over-year basis. The upside can be attributed to improvement in air-travel demand.

Air traffic (measured in revenue passenger miles or RPMs) for scheduled service surged 76% in the quarter under review. Capacity (measured in available seat miles or ASMs) also increased 32.9% year over year. The load factor (percentage of seats filled by passengers) widened 1890 basis points to 77.1% in the reported quarter, as traffic surge outweighed capacity expansion.

Operating cost per available seat miles (CASM), excluding fuel, increased 14.8% year over year to 7.52 cents. Average fuel cost per gallon (scheduled) surged 77.1% to $2.48 in the quarter. Total scheduled service passenger revenue per available seat miles (TRASM) rose 53.2% to 11.18 cents. 

Liquidity

As of Dec 31, 2021, Allegiant Travel’s total unrestricted cash and investments totaled $1,182.8 million compared with $685.3 million at the end of December 2020. Long-term debt and finance lease obligations (net of current maturities and related costs) came in at $1,612.5 million compared with $1,441.8 million reported at the end of 2020.

Q1'22 Expectations

For first-quarter 2022, ASM (for scheduled service) is expected to increase 19-23% from first-quarter 2019 figures.

Total system ASM are also expected to rise 19-23% from first-quarter 2019 figures.

Total operating revenues are expected to move up 5-9.5% from first-quarter 2019 actuals.

Fuel cost per gallon is expected to be at $2.67.

2022 Expectation

For 2022, under Airline capex, the projection for aircraft, engines, induction costs and pre-delivery deposits is at $255-$265 million.

The view for capitalized deferred heavy maintenance is at $85-$95 million.
Other airline capital expenditures are expected between $95 million and $105 million. Interest expenses are expected in the range of $85-$95 million.

Total project spending (Sunseeker Resorts Project) for 2022 is expected to be $560-$585 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -75.09% due to these changes.

VGM Scores

Currently, Allegiant Travel has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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 B. 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. It's no surprise Allegiant Travel has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.