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Air Transport Services (ATSG) Down 1.9% Despite Q2 Earnings Beat

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Shares of Air Transport Services (ATSG - Free Report) have dipped 1.9% despite reporting better-than-expected earnings per share and revenues for second-quarter 2022 on Aug 4. The decline may be due to management’s decision to increase 2022 guidance for capital expenditure to $625 million from $590 million. Moreover, the fact that ATSG did not raise its 2022 adjusted EBITDA guidance from $640 million (which is nearly $100 million above the 2021 actuals), despite a strong freighter leasing scenario, might have disappointed investors.

Other Aspects of Q2 Earnings Report

Air Transport Services’ second-quarter 2022 earnings (excluding 3 cents from non-recurring items) of 59 cents per share surpassed the Zacks Consensus Estimate of 51 cents. The bottom line surged 68.6% year over year on the back of impressive revenue performance. Revenues not only rose 24.4% year over year to $509.7 million but also surpassed the Zacks Consensus Estimate of $487.2 million.  

The top line was boosted by higher revenues from both segments, namely ACMI (aircraft, crew, maintenance & insurance) services and Cargo Aircraft Management (CAM). Revenues from the ACMI services unit increased 27% year over year to $347.5 million. Revenues from the CAM segment increased 24% to $114.7 million, while the same from other operations rose 11% to $107.9 million.

Revenues from the CAM segment in the reported quarter were bumped up by a larger fleet of externally leased Boeing 767s (nine have been leased since June 2021) from the year-ago level. Aircraft leasing and related revenues from external customers increased 21% year over year in the June quarter. Revenues from the ACMI services unit benefited from better airline operations. Revenue block hours increased 9% year over year in the quarter.

Air Transport Services’ total fleet included 121 aircraft (18 passenger and 103 freighter) in service at the end of the June quarter of 2022 compared with 117 at the end of the fourth quarter of 2021. ATSG expects to have a fleet (in service) of 18 passenger and 114 freighter planes at the end of 2022.

Total operating expenses increased 35% in the June quarter to $439 million with fuel expenses surging 99% as oil price moves northward. Adjusted EBITDA increased 23% year over year to $158 million owing to the strong freighter leasing scenario. Operating cash flow declined to $125 million from $183 million a year ago.

Due to higher customer receivables, adjusted free cash flow was $72 million compared with $123 million a year ago. Capex in the quarter was $52.6 million compared with $59.4 million a year ago.

Currently, ATSG carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q2 Performances of Some Other Transportation Companies

Delta Air Lines’ (DAL - Free Report) earnings (excluding 29 cents from non-recurring items) of $1.44 per share fell short of the Zacks Consensus Estimate of $1.71. Escalated operating expenses induced the earnings miss. Multiple flight cancellations in May and June also hurt results.

The earnings miss disappointed investors, resulting in the stock shedding value in early trading. In the year-ago quarter, Delta incurred a loss of $1.07 per share when air-travel demand was not as buoyant as in the current scenario.

DAL’s revenues came in at $13,824 million, which beat the Zacks Consensus Estimate of $13,608.9 million and soared 94% from the year-ago quarter’s figure as air-travel demand rebounded from the pandemic lows. The uptick in air-travel demand in the United States can be gauged from the fact that 75.9% of second-quarter 2022 passenger revenues came from the domestic markets.

J.B. Hunt Transport Services (JBHT - Free Report) quarterly earnings of $2.42 per share surpassed the Zacks Consensus Estimate of $1.61 and improved 50.3% year over year.

JBHT’s total operating revenues of $3,837.53 million also outperformed the Zacks Consensus Estimate of $2,908.37 million. The top line jumped 32% year over year on the back of segmental strength. J.B. Hunt’s total operating revenues, excluding fuel surcharges, rose 21.2% year over year.

CSX Corporation’s (CSX - Free Report) earnings of 50 cents per share (excluding 4 cents from non-recurring items) beat the Zacks Consensus Estimate of 47 cents and improved 25% year over year.

CSX’s total revenues of $3,815 million outperformed the Zacks Consensus Estimate of $2,990 million. The top line increased 28% year over year on the back of higher revenues in almost all markets, driven by pricing gains, fuel surcharge and contribution from the acquisition of Quality Carriers. CSX’s overall revenues per unit increased 27%.