Markets
GSL

Can Virgin America (VA) Outshine Earnings Estimates in Q1? - Analyst Blog

Low-cost airline Virgin AmericaVA , which went public in Nov 2014, will report its first quarter 2015 results on Apr 30, before the commencement of trading.

We note that the California-based carrier had made an impressive debut on Nasdaq. The company's shares had jumped over 30% on its very first day (Nov 14) as a publicly traded company. The warm welcome extended to the company by the market was mainly attributable to the good times prevailing in the U.S. aviation industry then, thanks to plunging oil prices .

With most of the companies in the airline space, like Delta Air Lines DAL and Southwest Airlines LUV , having reported better-than-expected earnings for the first quarter of 2015, lets see what's in store for Virgin America.

Why a Likely Positive Surprise?

Our proven model shows that Virgin America is likely to beat earnings estimates this quarter as it has the right combination of two key ingredients.

Zacks ESP : Earnings ESP for Virgin America is currently pegged at +7.14%. This is because the Most Accurate estimate of 15 cents stands above the Zacks Consensus Estimate of 14 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank : Virgin America carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Virgin America's Zacks Rank #3 and +7.14% ESP make us reasonably confident of an earnings beat on Apr 30.

What is Driving the Better-than-Expected Earnings?

Virgin America is leaving no stone unturned to expand its operations and boost its top line further. To that end, the carrier announced last month that it will introduce flights from Dallas Love Field to Austin-Bergstrom International Airport in Austin, TX, effective Apr 28, 2015. We are also impressed by the disciplined cost structure at Virgin America. Moreover, the carrier's practice of flying a single aircraft type (Airbus A320 family), high asset utilization and outsourcing of activities like baggage delivery, heavy maintenance and reservations are also encouraging.

The carrier projects capacity increase in the range of 2% to 3% in the first quarter on a year-over-year basis. Moreover, PRASM is estimated to range from a fall of 1% to a rise of 1% in the quarter. CASM (excluding fuel and profit sharing) is estimated to increase in the range of 1% to 3% during the period. The carrier expects economic fuel cost (inclusive of related taxes and hedge costs) to average between $2.45 and $2.55 per gallon in the quarter.

Stocks to Consider

Here are some other companies in the transportation sector that investors may also consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:

Global Ship Lease, Inc. GSL carries a Zacks Rank #2 and has an earnings ESP of +100%. The company is scheduled to report its first-quarter 2015 results on Apr 30.

Saia, Inc. SAIA carries a Zacks Rank #2 and has an earnings ESP of +4.08%. The company is scheduled to report its first-quarter results on Apr 29.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SOUTHWEST AIR (LUV): Free Stock Analysis Report

DELTA AIR LINES (DAL): Free Stock Analysis Report

VIRGIN AMERICA (VA): Free Stock Analysis Report

SAIA INC (SAIA): Free Stock Analysis Report

GLOBAL SHIP LS (GSL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

GSL SAIA LUV DAL

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More