Is a Beat in Store for Alexion (ALXN) This Earnings Season?
Allegiant Travel Company ALGT reported impressive traffic numbers for February. Traffic for the total system — including scheduled service and fixed fee contract — measured in revenue passenger miles (RPMs), increased 14.6% on a year-over-year basis to 937.28 million. System capacity, calculated in available seat miles (ASMs), improved 11.1% to 1.14 billion in the same month.
With traffic growth outpacing capacity expansion, load factor (percentage of seats filled with passengers) improved 250 basis points year over year to 82.2%. Strong demand for air travel contributed to the increase in load factor. In fact, this Las Vegas-based carrier transported 999.16 million passengers in the month, reflecting an increase of 15.7% on a year-over-year basis.
Impressive Price Performance
In the past three months, shares of Allegiant have outperformed the industry it belongs to. The stock has rallied 18.9% compared with the industry’s gain of 2.1%.
Notably, the impressive traffic report for February should boost the stock further.
High Costs Remain a Bane
Despite the impressive traffic numbers driven by the strong demand for air travel, escalating costs (labor as well as fuel) are expected to continue hurting the company’s bottom line going ahead. In the fourth quarter of 2017, cost per available seat miles (CASM), excluding fuel, increased 20.2% backed by the new pilot agreement, among other factors.
Labor costs are likely to be high in the first quarter of 2018 too, thereby limiting bottom-line growth. The rise in fuel costs, which was $2.19 per gallon in February, also does not bode well for the stock.
Zacks Rank & Key Picks
Allegiant carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the airline space are Delta Air Lines, Inc. DAL, Southwest Airlines Co. LUV and Copa Holdings, S.A. CPA, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
While shares of Delta and Copa Holdings have gained 5% in the past month, Southwest Airlines has appreciated 2.7%.
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