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Why Investors Should Avoid Air Transport Services (ATSG) Now
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Air Transport Services (ATSG - Free Report) is currently mired in multiple headwinds, which we believe, have made it an unimpressive investment option.
Let’s delve deeper
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for earnings for the current-quarter and current year has been revised 3.5% and 22.3% downward, respectively, over the past 60 days. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
An Underperformer: Air Transport Services stock has declined 32.9% in a year’s time compared with its industry’s 4.3% fall.
Bearish Industry Rank: The industry to which ATSG belongs, currently has a Zacks Industry Rank of 184 (of 250 plus groups). Such an unfavorable rank places ATSG in the bottom 26% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Other Headwinds: Air Transport Services reported lower-than-expected earnings per share in the fourth quarter of 2022. Moreover, management issued a dim EPS guidance for 2023 which is in the range of $1.85-$2. In 2022, ATSG's adjusted earnings per share was $2.28.
The downbeat guidance for 2023 was due to headwinds like inflation-related woes, reduced ACMI (aircraft, crew, maintenance & insurance) services operations and higher interest costs.
The increase in expenses on fuel due to the current oil price surge is hurting ATSG's bottom line. Evidently, operating costs increased 24.8% in 2022 with fuel expenses rising 58.7%. ATSG’s debt load is bothersome too.
ATSG is highly leveraged. Evidently, its debt-to- equity ratio is nearly 1. A high debt-to-equity ratio indicates that the company depends primarily on debt to finance its growth.
Copa Holdings currently sports a Zacks Rank #1. CPA's focus on its cargo segment is very encouraging. In fourth-quarter 2022, cargo and mail revenues jumped 69% to $27.09 million, owing to higher cargo volumes and yields.
For first-quarter and full-year 2023, CPA’s earnings are expected to register 302.9% and 40.6% growth, respectively, on a year-over-year basis.
GATX Corporation carries a Zacks Rank #2 (Buy) at present. The gradual improvement in the North American railcar leasing market is a huge positive for GATX. Management expects recovery in the North American railcar leasing market to continue in 2023.
For full-year 2023, GATX’s earnings are expected to register 10.5% growth on a year-over-year basis.
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Why Investors Should Avoid Air Transport Services (ATSG) Now
Air Transport Services (ATSG - Free Report) is currently mired in multiple headwinds, which we believe, have made it an unimpressive investment option.
Let’s delve deeper
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for earnings for the current-quarter and current year has been revised 3.5% and 22.3% downward, respectively, over the past 60 days. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
An Underperformer: Air Transport Services stock has declined 32.9% in a year’s time compared with its industry’s 4.3% fall.
Image Source: Zacks Investment Research
Weak Zacks Rank and Style Score: Air Transport Services currently carries a Zacks Rank #5 (Strong Sell). Moreover, ATSG’s current Growth Score of C highlights its unattractiveness. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bearish Industry Rank: The industry to which ATSG belongs, currently has a Zacks Industry Rank of 184 (of 250 plus groups). Such an unfavorable rank places ATSG in the bottom 26% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Other Headwinds: Air Transport Services reported lower-than-expected earnings per share in the fourth quarter of 2022. Moreover, management issued a dim EPS guidance for 2023 which is in the range of $1.85-$2. In 2022, ATSG's adjusted earnings per share was $2.28.
The downbeat guidance for 2023 was due to headwinds like inflation-related woes, reduced ACMI (aircraft, crew, maintenance & insurance) services operations and higher interest costs.
The increase in expenses on fuel due to the current oil price surge is hurting ATSG's bottom line. Evidently, operating costs increased 24.8% in 2022 with fuel expenses rising 58.7%. ATSG’s debt load is bothersome too.
ATSG is highly leveraged. Evidently, its debt-to- equity ratio is nearly 1. A high debt-to-equity ratio indicates that the company depends primarily on debt to finance its growth.
Stocks to Consider
Some better-ranked stocks in the Zacks Transportation sector are Copa Holdings (CPA - Free Report) and GATX Corporation (GATX - Free Report) ).
Copa Holdings currently sports a Zacks Rank #1. CPA's focus on its cargo segment is very encouraging. In fourth-quarter 2022, cargo and mail revenues jumped 69% to $27.09 million, owing to higher cargo volumes and yields.
For first-quarter and full-year 2023, CPA’s earnings are expected to register 302.9% and 40.6% growth, respectively, on a year-over-year basis.
GATX Corporation carries a Zacks Rank #2 (Buy) at present. The gradual improvement in the North American railcar leasing market is a huge positive for GATX. Management expects recovery in the North American railcar leasing market to continue in 2023.
For full-year 2023, GATX’s earnings are expected to register 10.5% growth on a year-over-year basis.