Allegiant Travel (ALGT) has been on a run lately, up almost 15% over the past four weeks, and is positioned to continue to grow through their Q4 14 earnings release on January 28th. There are several factors behind Allegiant’s sustained run over the past month; declining oil prices, the fact the company does not hedge fuel costs which should make their costs one of the lowest in the industry, their world class leisure destinations, and travel package bundling (car, hotel, air, travel services).
As you can see the chart below, Allegiant Travel has seen significant price appreciation over the past month, and consistent growth over the past several years.
Positive Factors
With oil prices dropping precipitously over the past few months, this non fuel hedging company is best positioned in the sector to reap the benefits of low oil costs. Further, the company just announced yesterday that total passenger traffic increased YoY by 6.1% in December 2014 to 692.18 million revenue passenger miles, total capacity increased 3.9% YoY in December, load factor increased 1.7% YoY, and total passengers carried rose 8.8% YoY for December.
Rising Estimates
Given the consistent positive news, the Zacks Consensus Earnings Estimates have significantly increased over the past 30 days for Q4 14, FY 14, and FY 15. Q4 14 rose from $1.31 to $1.37, FY 14 increased from $5.85 to $6.08, and FY 15 jumped up from $8.06 to $9.31.
The table below shows the Price and Consensus Graph detailing how estimates have increased over time.
Bottom Line
The impact that lower oil prices has on airline stocks cannot be understated, and while the oil prices are deflated that airlines will reap big profits. This sector has seen massive positive revisions over the past several weeks, and this trend is not expected to slow down for the next few months. It is expected that oil prices will begin to increase in late Q1 2015 at the earliest.
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