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Why Is Allegiant Travel (ALGT) Up 15.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Allegiant Travel (ALGT - Free Report) . Shares have added about 15.4% in that time frame, outperforming the S&P 500.

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

Second-quarter results

Allegiant reported second-quarter earnings of $3.10 per share, which beat the Zacks Consensus Estimate of $2.66. The bottom line improved on a year-over-year basis despite high fuel costs.

Quarterly revenues increased 8.7% year over year to $436.8 million, marginally surpassing the Zacks Consensus Estimate of $436.5 million. Moreover, the top line was primarily driven by a 10.4% rise in passenger revenues.

Furthermore, the company’s board has cleared a dividend of 70 cents per share, payable Aug 31, to shareholders of record as of Aug 17.

Systemwide air traffic (measured in revenue passenger miles) in the quarter under review rose 10.7% and capacity (measured in available seat miles) increased 9.4% year over year. Load factor (percentage of seats filled by passengers) was 83.5%, up 90 basis points, as capacity expansion was outweighed by traffic growth.

Cost per available seat miles (CASM) excluding fuel fell 5%. Total scheduled service revenue per available seat miles (TRASM) also inched up 0.5% to 11.15 cents.

Q3 Outlook

Scheduled and system ASMs in the quarter are expected to increase between 13% and 15% compared with the prior-year quarter’s tally.

Revised 2018 Outlook

The company expects fuel cost per gallon of $2.35 for 2018. The previous forecast for the metric was $2.20 per gallon. Additionally, effective tax rate is now anticipated between 21% and 22%, unchanged from the prior guidance. Further, projection for capital expenditures is unchanged at $300 million. System capacity is likely to increase between 9% and 11%. The previous forecast for this metric was 11.

The company expects earnings per share in the band of $9-$10 for the current year, lower than the previous guidance of $10-$12.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimate. The consensus estimate has shifted -35.47% due to these changes.

VGM Scores

At this time, Allegiant Travel has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for growth and to a lesser degree momentum.

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 #4 (Sell). We expect a below average return from the stock in the next few months.


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