Air Transport Services (ATSG) Skids 18.8% Post Q4 Earnings Miss
Shares of Air Transport Services ATSG have plummeted 18.8% since its fourth-quarter 2022 earnings release on Feb 23. Lower-than-expected earnings per share in fourth-quarter 2022 and below par outlook for 2023 resulted in this downside.
Earnings Report & Outlook
Air Transport Services’ fourth-quarter 2022 earnings (excluding 3 cents from non-recurring items) of 53 cents per share missed the Zacks Consensus Estimate of 57 cents. However, the bottom line inched up 1.9% year over year.
Management expects 2023 earnings per share in the range of $1.85-$2. The mid-point of the guided range ($1.925) is well below the Zacks Consensus Estimate of $2.34. The downbeat guidance was due to headwinds like inflation-related woes, reduced ACMI (aircraft, crew, maintenance & insurance) services operations and higher interest costs.
Coming back to the December-quarter performance, revenues rose 10.5% year over year to $533 million and surpassed the Zacks Consensus Estimate of $520.1 million. The top line was boosted by higher revenues from both segments, namely ACMI services and Cargo Aircraft
Revenues from ACMI services increased 10.6% year over year to $369.4 million. Revenues from CAM and other operations rose 2.9% and 18.2% to $108.6 million and $111.5 million, respectively.
Revenues from CAM were bumped up by a larger fleet of externally leased Boeing 767s from the year-ago level. Ninety one CAM-owned 767 freighter aircraft were leased to external customers as of Dec 31, 2022, compared with 85 leased in 2021.
Air Transport Services’ total fleet in service included 128 aircraft (18 passenger and 110 freighter) in service at 2022 end compared with 117 at 2021 end. ATSG expects to have a fleet (in service) of 18 passenger and 124 freighter planes at the end of 2023.
Total operating expenses increased 14.4% to $460.5 million with fuel expenses increasing 30.1% as oil price rises. Adjusted EBITDA increased 5.1% year over year to $162.7 million owing to a strong freighter leasing scenario.
Operating cash flow decreased to $74.1 million from $1454.3 million a year ago. Adjusted free cash flow was $32.6 million compared with $72.6 million a year ago. Capex was $56.5 million compared with $120.8 million in fourth-quarter 2021.
Currently, ATSG carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Management expects 2023 adjusted EBITDA in the $650 million to $660 million range. ATSG expects capital spending for 2023 to be $850 million including $260 million for sustaining capex and $590 million for growth. Management anticipates a 5% reduction in usage of cargo aircraft for 2023, highlighting the weakness pertaining to the air cargo market
Q4 Performance of Some Other Transportation Companies
United Airlines’ UAL fourth-quarter 2022 earnings of $2.46 per share beat the Zacks Consensus Estimate of $2.07. In the year-ago quarter, UAL incurred a loss of $1.60 per share when air-travel demand was not as buoyant as in the current scenario. The fourth quarter of 2022 was the third consecutive profitable quarter at UAL since the onset of the pandemic.
Operating revenues of $12,400 million beat the Zacks Consensus Estimate of $12,230 million and increased 51.37% year over year owing to upbeat air-travel demand. The optimistic air-travel demand scenario is also evident from the fact that total operating revenues increased 13.9% from fourth-quarter 2019 (pre-COVID-19) levels.
Delta Air Lines’ DAL fourth-quarter 2022 earnings (excluding 19 cents from non-recurring items) of $1.48 per share beat the Zacks Consensus Estimate of $1.29. DAL reported earnings of 22 cents per share a year ago, dull in comparison with the current scenario, as air-travel demand was not so buoyant then.
DAL reported revenues of $13,435 million, which also surpassed the Zacks Consensus Estimate of $13,030.3 million. Driven by the high air-travel demand, total revenues increased more than 41.87% on a year-over-year basis.
CSX Corporation’s CSX fourth-quarter 2022 earnings of 49 cents per share beat the Zacks Consensus Estimate of 47 cents and improved 16.67% year over year.
Total revenues of $3,730 million surpassed the Zacks Consensus Estimate of $3,722.1 million. The top line increased 8.84% year over year on the back of higher fuel surcharge, pricing gains, an increase in volumes, and storage and other revenues. Overall revenues per unit increased 11%.
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