Allegiant Travel Company (ALGT) is slated to report its second-quarter 2014 results on July 23, after the market closes. Last quarter, the company delivered a 5.08% positive earnings surprise. Let’s see how things are shaping up prior to this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Allegiant Travel is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +6.40% for Allegiant Travel. This is a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: Allegiant Travel currently has a Zacks Rank #1 (Strong Buy) which increases the predictive power of ESP. Note that stocks with Zacks Rank #1, 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings.
The combination of Allegiant Travel’s Zacks Rank #1 and +6.40% ESP makes us confident of an earnings beat this quarter.
Factors at Play
Allegiant Travel is expected to benefit from an improving market scenario in the forthcoming quarterly results. A sharp drop in the U.S. unemployment rate and the improving pace of job creation bodes well for the U.S. economy, which in turn will boost the overall airline industry. Additionally, the company, which provides low cost air services to residents of small and underserved U.S. cities, expects to report PRASM (passenger revenue per available seat mile) growth of 6.1% to 6.5% in the second quarter.
The carrier expects to deliver earnings growth of 28.14% this quarter while for the full year, the earnings growth estimate stands at 25.58%. Further, the carrier has witnessed positive earnings estimate revisions over the last couple of months, which explains our bullish stance on the company.
Other Stocks to Consider
Here are some other companies to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Southwest Airlines Co (LUV) with earnings ESP of +3.39% and a Zacks Rank #1.
American Airlines Group Inc. (AAL) with earnings ESP of +1.56% and a Zacks Rank #1.
Alaska Air Group Inc. (ALK) with earnings ESP of +0.92% and a Zacks Rank #1.
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