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Allegiant (ALGT) Posts Decent Numbers for August 2021 Traffic

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Allegiant Travel Company ALGT reported impressive traffic numbers for the month of August as air-travel demand improved in the United States. With more Americans getting vaccinated, the picture is rosier on a year-over-year basis.

Scheduled traffic (measured in revenue passenger miles) surged 89.1% from August 2020 levels. Capacity (measured in available seat miles) for scheduled service increased 12.3% from August 2020 readings. With the traffic surge outweighing capacity expansion, load factor (% of seats filled by passengers) in August expanded 30.1 points to 74.2% from the year-ago period’s levels. For the total system (including scheduled service and fixed fee contract), Allegiant carried more passengers in August 2021, up 86.3% from the year-ago reported levels.

Due to rising cases of the Delta variant, the picture is somewhat dim from its August 2019 (pre-COVID) levels. In comparison to August 2019 numbers, scheduled traffic dropped 2.5%, while capacity surged 12%. Consequently, load factor tanked 11 points to 74.2%. For the total system, the airline carried 5.6% less passengers in August 2021 from August 2019 levels.

With oil prices shooting up, Allegiant is witnessing a rise in fuel cost per gallon. The metric is now expected to be at $2.19 per gallon (previous expectation: $2.11 per gallon) for the third quarter.

The carrier expects its September-end quarter’s total operating revenues to be up 3-5% now (previous expectation: up 3.5-7.5%) from third-quarter 2019 levels.  Total systems available seat miles are expected to go up 13-14% (previous expectation: 16-20%) from its 2019 reported numbers. Gregory Anderson, executive vice president and chief financial officer of the company, stated, "We expect third quarter capacity to be up roughly 13.5 percent as compared with 2019, a 4.5 percentage point reduction from initial expectations,".

Expectations of lighter demand due to the spread of the Delta variant has compelled the company to trim its capacity view. Adjusted EBITDA margin for the quarter is estimated to be approximately at 16-18%. Weighted average share count for third-quarter is estimated to be at 17.8 million (previous expectation: 17.1 million).

Zacks Rank & Stocks to Consider

Allegiant currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. KNX, Landstar System, Inc. LSTR and Herc Holdings Inc. HRI. Knight-Swift and Landstar carry a Zacks Rank #2 (Buy), while Herc Holdings sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for Knight-Swift, Landstar and Herc Holdings is pegged at 15%, 12% and 49.2%, respectively.

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