Technology

Why Is Allegiant Travel (ALGT) Up 18% Since Last Earnings Report?

A month has gone by since the last earnings report for Allegiant Travel (ALGT). Shares have added about 18% 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 drivers.

Allegiant  Posts Wider-Than-Expected Q2 Loss

Allegiant  reported second-quarter 2020 loss of $5.96 per share (excluding 11 cents from non-recurring items) was wider than the Zacks Consensus Estimate of a loss of $4.53.  The company reported earnings of $4.33 per share in the year-ago quarter when air-travel demand was strong. However, with the advent of coronavirus the same plummeted and hurt second-quarter 2020 results.

Moreover, quarterly revenues of $133.3 million plunged 72.9% year over year but surpassed the Zacks Consensus Estimate of $125.9 million. The downtick was caused by 74.4% drop in passenger revenues.

 Quarter in Details

Air traffic (measured in revenue passenger miles or RPMs) for scheduled service declined 69.3% in the quarter under review. Capacity (measured in available seat miles or ASMs) dropped 49.6% year over year. Consequently, load factor (percentage of seats filled by passengers) deteriorated 3270 basis points to 50.9% in the reported quarter as capacity contraction outweighed traffic plunge.

Airline operating cost per available seat miles (CASM) excluding fuel rose 65% year over year. Average fuel cost per gallon (scheduled) declined 50% to $1.11 in the quarter. Moreover, total scheduled service passenger revenue per available seat miles (TRASM) fell 47.6% to 5.75 cents.

Liquidity

As of June 30, 2020, Allegiant Travel’ unrestricted cash and investments totalled     $663.1 million compared with $473.3 million at the end of December 2019. Long-term debt and finance lease obligations (net of current maturities and related costs)     came at $1273.4 million, up 2% from 2019 end.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -217.76% due to these changes.

VGM Scores

At this time, Allegiant Travel has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Allegiant Travel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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

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