Investors in Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) had a good week, as its shares rose 2.4% to close at US$60.60 following the release of its third-quarter results. Revenues were US$810m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$2.78, an impressive 25% ahead of estimates. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following the latest results, Atlas Air Worldwide Holdings' six analysts are now forecasting revenues of US$3.16b in 2021. This would be an okay 4.4% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Atlas Air Worldwide Holdings forecast to report a statutory profit of US$7.80 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.12b and earnings per share (EPS) of US$7.59 in 2021. So the consensus seems to have become somewhat more optimistic on Atlas Air Worldwide Holdings' earnings potential following these results.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 13% to US$79.50. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Atlas Air Worldwide Holdings, with the most bullish analyst valuing it at US$84.00 and the most bearish at US$66.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Atlas Air Worldwide Holdings is an easy business to forecast or the the analysts are all using similar assumptions.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Atlas Air Worldwide Holdings' revenue growth is expected to slow, with forecast 4.4% increase next year well below the historical 12%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.1% per year. Factoring in the forecast slowdown in growth, it seems obvious that Atlas Air Worldwide Holdings is also expected to grow slower than other industry participants.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Atlas Air Worldwide Holdings' earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Atlas Air Worldwide Holdings analysts - going out to 2023, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 2 warning signs for Atlas Air Worldwide Holdings (of which 1 doesn't sit too well with us!) you should know about.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.