Why Allegiant Travel (ALGT) May Be a Boon for Your Portfolio?
Las Vegas, NV-based Allegiant Travel Company ALGT, the parent company of Allegiant Air, is currently a shining star in the airline space. The company, which does not hedge fuel costs, has been making impressive savings owing to the prevalent weakness in oil prices. Driven by low oil prices and the company’s constant efforts to expand, the stock has appreciated in excess of 37% so far this year.
The positive impact of soft oil prices on the bottom line is evident from the fact that this Zacks Rank #2 (Buy) stock has delivered positive earnings surprises in three of the last four quarters with an average beat of 6.62%.
Strong Second Quarter Results
In the second quarter of 2015, the company reported earnings per share of $3.18, beating the Zacks Consensus Estimate by 5 cents. Quarterly revenues increased 10.9% year over year to $322 million. Airline traffic moved up 13.6% year over year on a 17.5% rise in capacity, while load factor (% of seats filled by passengers) stood at 85.7% against 88.7% recorded in the year-ago quarter. Fuel expense per ASM declined 35.3% in the reported quarter, thus aiding the bottom line.
Expansion Efforts Impressive
Allegiant Travel’s constant efforts to expand boost optimism. The company, through Allegiant Air, operates a low-cost, high-efficiency, all-jet passenger airline offering air travel both on a stand-alone basis as well as bundled with hotel rooms and rental cars.
In a bid to expand further, the travel company announced last month that it will operate nonstop flights on as many as 17 new routes, including two new cities, San Antonio and Kansas City.
Earnings Estimates Move North
We note that earnings estimates for Allegiant Travel have exhibited a healthy uptrend following strong second-quarter results and the recent expansion drive. Over the last 60 days, the 2015 Zacks Consensus Estimate of earnings has gone up 86 cents to $12.62 per share on the back of upward revisions by 10 analysts. Likewise, the Zacks Consensus Estimate for 2016 has jumped $1.47 over the same period to $13.12 per share on the back of positive revisions by 7 analysts.
Strong Earnings Growth Potential: Weak Oil a Major Catalyst
Allegiant Travel’s 2015 earnings per share are projected to grow at a whopping 98.1% on a year-over-year basis. Expected soft oil prices for the remainder of 2015 is the primary factor influencing the massive anticipated jump in 2015 earnings. Earnings for 2016 are also projected to display year-over-year growth. The long-term estimated earnings growth rate stands at an attractive 22.94%, well above the industry average of 17%.
Other Stocks to Consider
Apart from Allegiant Travel, investors interested in the airlines industry may also consider stocks like Ryanair Holdings RYAAY, JetBlue Airways Corporation JBLU and SkyWest SKYW. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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