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Allegiant Travel (ALGT) Stock Declines 12% YTD: Here's Why

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Shares of Allegiant Travel Company (ALGT - Free Report) have declined 12.3% on a year-to-date basis due to multiple headwinds.


Reasons for Dismal Performance

Escalating fuel costs have been putting pressure on the bottom line for quite some time, with second-quarter 2018 result reflecting the same. During the quarter, fuel costs increased more than 39% to $2.38 per gallon. In fact, the company expects earnings per share (EPS) in the band of $9-$10 for 2018, lower than the previous guidance of $10-$12. Higher fuel costs have compelled the company to lower earnings guidance. The carrier estimates fuel cost per gallon of $2.35 for 2018. The previous forecast for the metric was $2.20 per gallon.

Furthermore, the company’s business has suffered a setback on the revenue front due to late deliveries in May. In another unfortunate case, Allegiant’s dispatchers did not ratify the provisional agreement with the relevant union (International Brotherhood of Teamsters). Additionally, woes related to capacity expansion are serious concerns. The metric is projected to grow in the range of 9-11% for 2018.

Moreover, shares of the Las-Vegas based company are still suffering from CBS News’ Report, 60 Minutes, which alleged that the company was facing a number of safety-related issues. These allegations are being investigated.

Bearish Readings & Zacks Rank

The negativity revolving around the stock can be gauged from the Zacks Consensus Estimate being revised 35.3% downward in the last 30 days for current-quarter earnings.

Moreover, the company’s Momentum Score of C highlights short-term unattractiveness.

The bearish Zacks Rank #4 (Sell) carried by Allegiant reflects these headwinds. The unfavorable rank implies that investors will do well to get rid of the stock from their respective portfolios now. Going by the proven model, the Sell-rated stocks (#4 or 5) are likely to underperform the broader market over the next one to three months.

Stocks to Consider

A few better-ranked stocks in the broader Transportation Sector are Atlas Air Worldwide Holdings, Inc. (AAWW - Free Report) , Triton International Limited (TRTN - Free Report) and Old Dominion Freight Line, Inc. (ODFL - Free Report) . While Triton carries a Zacks Rank #2 (Buy), Atlas Air Worldwide and Old Dominion sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Atlas Air Worldwide, Triton and Old Dominion have gained 8.2%, 31.3% and 7% in the last six months, respectively.

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