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Here's Why You Should Retain Allegiant Travel (ALGT) Stock
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Allegiant Travel’s (ALGT - Free Report) efforts to modernize its fleet are encouraging. The fleet size at the end of 2024 is expected to expand to 130 from 126 at 2023-end. Rising fuel costs threaten Allegiant’s bottom line. Additionally, increasing labor expenses and high capital expenditures are further impacting ALGT’s profitability.
Factors Favoring ALGT
ALGT's revenues soared 9% year over year in 2023, mainly driven by a robust 8.7% increase in passenger revenues, which account for 93% of total revenues. Strong traffic numbers continue to reflect upbeat air travel demand.
ALGT’s commitment to fleet modernization is evidenced by an all-Airbus fleet. Despite COVID-19-related woes, the fleet size increased from 91 in 2019 to 126 in 2023.
Key Risks
In 2024, airline capex, including aircraft, engines, induction costs and pre-delivery deposits, is forecasted in the band of $535-555 million despite economic uncertainty. Capitalized deferred heavy maintenance is estimated in the range of $80-$90 million, with other airline capital expenditures ranging from $155 to $165 million. These significant investments could impact the bottom line.
Rising fuel costs threaten ALGT’s bottom line, attributed to an increase in crude prices, influenced by production cuts by Saudi Arabia and Russia. Management anticipates fuel costs per gallon to reach $2.85 in the first quarter of 2024.
Labor cost increases are impacting ALGT's bottom line despite a 14.6% decrease in aircraft fuel costs in 2023. Salary and benefits expenses surged by 24.5% during the same period. Anticipated new labor agreements may further elevate labor costs. We project a 30.7% increase in salary and benefits expenses in the first quarter of 2024 compared to the same period in 2023.
AL has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 20.15%. AL currently carries Zacks Rank #2 (Buy). Continuous fleet growth and increased sales activity are boosting Air Lease's revenues.
The Zacks Consensus Estimate for 2024 earnings has been revised 26.04% upward over the past 90 days. The company has an expected earnings growth rate of 30% for 2024. Shares of AL have rallied 30.2% in the past year.
The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 26% over the past 90 days. Shares of SkyWest have surged 208.3% in the past year.
SKYW has an expected earnings growth rate of more than 100% for 2024. The company delivered a trailing four-quarter earnings surprise of 128.02%, on average.
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Here's Why You Should Retain Allegiant Travel (ALGT) Stock
Allegiant Travel’s (ALGT - Free Report) efforts to modernize its fleet are encouraging. The fleet size at the end of 2024 is expected to expand to 130 from 126 at 2023-end. Rising fuel costs threaten Allegiant’s bottom line. Additionally, increasing labor expenses and high capital expenditures are further impacting ALGT’s profitability.
Factors Favoring ALGT
ALGT's revenues soared 9% year over year in 2023, mainly driven by a robust 8.7% increase in passenger revenues, which account for 93% of total revenues. Strong traffic numbers continue to reflect upbeat air travel demand.
ALGT’s commitment to fleet modernization is evidenced by an all-Airbus fleet. Despite COVID-19-related woes, the fleet size increased from 91 in 2019 to 126 in 2023.
Key Risks
In 2024, airline capex, including aircraft, engines, induction costs and pre-delivery deposits, is forecasted in the band of $535-555 million despite economic uncertainty. Capitalized deferred heavy maintenance is estimated in the range of $80-$90 million, with other airline capital expenditures ranging from $155 to $165 million. These significant investments could impact the bottom line.
Rising fuel costs threaten ALGT’s bottom line, attributed to an increase in crude prices, influenced by production cuts by Saudi Arabia and Russia. Management anticipates fuel costs per gallon to reach $2.85 in the first quarter of 2024.
Labor cost increases are impacting ALGT's bottom line despite a 14.6% decrease in aircraft fuel costs in 2023. Salary and benefits expenses surged by 24.5% during the same period. Anticipated new labor agreements may further elevate labor costs. We project a 30.7% increase in salary and benefits expenses in the first quarter of 2024 compared to the same period in 2023.
Zacks Rank
ALGT currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Investors interested in the broader Transportation sector may consider stocks like Air Lease (AL - Free Report) and SkyWest (SKYW - Free Report) .
AL has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 20.15%. AL currently carries Zacks Rank #2 (Buy). Continuous fleet growth and increased sales activity are boosting Air Lease's revenues.
The Zacks Consensus Estimate for 2024 earnings has been revised 26.04% upward over the past 90 days. The company has an expected earnings growth rate of 30% for 2024. Shares of AL have rallied 30.2% in the past year.
SkyWest's fleet modernization efforts are commendable. SKYW sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 26% over the past 90 days. Shares of SkyWest have surged 208.3% in the past year.
SKYW has an expected earnings growth rate of more than 100% for 2024. The company delivered a trailing four-quarter earnings surprise of 128.02%, on average.