Allegiant Travel Co. (ALGT) delivered positive earnings surprises in four out of the last five quarters, helping its stock price to soar more than 73% since August 2011. This low-cost air travel operator recently reported its 37th consecutive profitable quarter, buoyed by a slowly-improving U.S. economy, higher passenger traffic and falling fuel prices.
Earnings estimates have been moving higher, making ALGT a Zacks #1 Rank (Strong Buy) stock on July 3, 2012. Given the long-term growth projection of 28.4% and the recent announcement of large second-quarter passenger traffic, Allegiant Travel is now an attractive investment opportunity for aggressive growth investors.
Healthy First Quarter
On April 25, Allegiant Travel reported first quarter 2012 adjusted net earnings of $1.13 per share, beating the Zacks Consensus Estimate by 15.3% and the year-ago earnings by 27%. Total operating revenue of $237.9 million surpassed the Zacks Consensus Estimate by 0.8% and increased 23.1% year over year.
EBITDA surged 28.1% from last year to approximately $48.3 million. EBITDA margin was 20.3%, compared with 19.5% in the year-ago quarter. Excluding fuel prices, operating expense per passenger dropped 1.5% to $55.10.
Traffic Jumps in Q2
Recently, Allegiant Travel declared its preliminary passenger traffic results for the second quarter. Total passenger traffic managed by the company increased 15.1% year over year to 1,794,665. Total revenue passenger miles were 1636.1 million, reflecting an improvement of 16.7%. Total seat miles jumped 18.1% to 1862.3 million from 1576.8 million.
Estimates Revisions Climbing
The past month has seen five of 12 estimates for 2012 move higher, lifting the Zacks Consensus Estimate by nearly 4% to $4.13. ALGT has also watched four of 12 estimates advance for next year, boosting the Zacks Consensus Estimate by about 2.3% to $5.31. This suggests year-over-year profit improvement of more than 28% for 2013.
Allegiant Travel's current PEG ratio is 0.6, a 40% discount to the benchmark of 1.0. However, on a forward P/E basis, the stock currently trades at 17.08x, a 50.2% premium to the peer group average of 11.37x. Allegiant Travel looks quite attractive given a trailing 12-month ROE of 15.5%, which is 104% higher than the peer group average of 7.6%.
The chart below shows a secular positive price movement since August 2011, barring some minor pullbacks. The stock has been consistently trading above its 50 and 200-days moving averages since March 2012. The widening gap between the stock price line and that of 50 and 200-days moving averages show the growth potential of Allegiant Travel. Year-to-date, the stock has returned 32.3%, significantly outpacing the benchmark S&P 500 return of a little over 5%.
Las Vegas, Nevada headquartered Allegiant Travel Co. was founded in 1997. The company is an air travel operator linking travelers in small cities to several leisure destinations, such as Las Vegas, Orlando, Phoenix, Tampa/St. Petersburg, Los Angeles, and Ft. Lauderdale. Allegiant Travel offers leisure tours both on a standalone basis and bundled with hotel rooms, rental cars, and other travel related services.
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