Allegiant Travel Company ALGT is scheduled to report fourth-quarter 2017 earnings numbers on Jan 31 after the market closes.
Last quarter, the company delivered a positive earnings surprise of 1.5%. However,revenues lagged expectations. Additionally, the bottom line, contracted 49.5% on a year-over-year basis due to high costs. While the top line increased 4.6% year over year, mainly on network growth.
Let’s see, how things shape up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Allegiant is likely to beat on earnings this quarter with the perfect combination of the two key ingredients:
Zacks ESP: Allegiant has an Earnings ESP of +1.09%, representing the difference between the Most Accurate estimate (stands at $1.79 per share) and the Zacks Consensus Estimate, which is pegged lower at $1.78. A positive ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Allegiant carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have significantly higher chances of beating estimates.
Conversely, all Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.
Allegiant Travel Company Price and EPS Surprise
Allegiant Travel Company Price and EPS Surprise | Allegiant Travel Company Quote
Factors at Play
Things appear to look up for Allegiant now, post the destructive phase caused by Hurricane Irma and the Las Vegas shooting.The improved guidance with respect to fourth-quarter total revenues per available seat miles (TRASM: a key measure of unit revenues)bears testimony to this favorable environment.
TRASM for the fourth quarter is anticipated in the range of down 0.3% to up 0.1%, reflecting an increase over the previous view, which projected the metric in the -1% to +1% band.
Moreover, the company’s efforts to reward shareholders through share buybacks and dividend payments are also encouraging. Its fleet modernization efforts are a further positive.
However, high costs (labor and fuel) are expected to hurt the bottom line in the fourth quarter of 2017 as in the third quarter. Non-fuel unit costs are now likely to grow 5.3-5.7% (past outlook: 7-9%). The Zacks Consensus Estimate for fourth-quarter non-fuel unit costs stands at 6.68 cents, above the year-ago reported figure of 6.29 cents per share.
Capacity overexpansion is also likely to hamper the company’s results in the to-be-reported quarter. The company estimates a system-wide capacity expansion of 10-12% for the fourth quarter of 2017, up from the former prediction of a 9-13% rise. The Zacks Consensus Estimate for fourth-quarter capacity is pegged at 3,412 million, higher than 3,073 million in fourth-quarter 2016.
Other Stocks to Consider
Investors also interested in other stocks worth considering from the broader Transportation sector may check out Atlas Air Worldwide Holdings AAWW, SkyWest, Inc. SKYW and Air Lease Corporation AL, awaiting earnings releases this time around:
Atlas Air Worldwide has an Earnings ESP of +2.16% and a Zacks Rank of 3. The company is expected to announce fourth-quarter results on Feb 22.
SkyWest has an Earnings ESP of +5.7% and a Zacks Rank #2. The company is scheduled to release fourth-quarter results on Feb 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Air Lease has an Earnings ESP of +1.26% and a Zacks Rank of 2. The company will report fourth-quarter 2017 results on Feb 22.
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