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What to Expect From Allegiant (ALGT) This Earnings Season?

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What to Expect From Allegiant (ALGT) This Earnings Season?

High costs are likely to hurt Allegiant's (ALGT) bottom line in second-quarter 2018 results.

Allegiant Travel Company ALGT is scheduled to report second-quarter 2018 earnings on Jul 25, after market close.

In the first quarter of 2018, the company’s earnings came in at $3.42 per share, surpassing the Zacks Consensus Estimate of $3. The bottom line increased significantly on a year-over-year basis. The quarterly results were aided by higher revenues.

Quarterly revenues increased in double-digits on a year-over-year basis to $425.4 million, marginally above the Zacks Consensus Estimate of $425.1 million. The top line was primarily driven by significant increase in ancillary revenues.

Let’s see how things shape up for this announcement.

Factors at Play

We expect high labor costs to hurt the bottom line in the soon-to-be reported quarter. Escalating fuel costs, expected at $2.38 per gallon, do not bode well for the stock.

Moreover, woes related to capacity extension are major concerns. For the quarter under review, the company anticipates average seat miles (scheduled and system) to increase in the range of 10-14%. The Zacks Consensus Estimate for second-quarter capacity is pegged at 4,013 million, which reflects an increase from 3,729 million in first-quarter 2018.

Additionally, shares of Allegiant are still suffering from CBS News’ Report, 60 Minutes, which alleged that the company was facing a number of safety-related issues. These allegations are being investigated. We expect an update on this front during the second-quarter conference call.

However, the company’s efforts to reward shareholders through share buybacks and dividend payments are impressive. Its fleet-modernization initiatives look encouraging as well.

Allegiant Travel Company Price and EPS Surprise

 

Allegiant Travel Company Price and EPS Surprise | Allegiant Travel Company Quote

Earning Whispers

According to the Zacks model, a company needs to have the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase the odds of an earnings surprise. However, that is not the case as highlighted below.

Earnings ESP: Allegiant has an Earnings ESP of -3.52% as the Most Accurate Estimate is at $2.57 per share, lower than the Zacks Consensus Estimate of $2.66. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Allegiant carries a Zacks Rank #4 (Sell), which lowers the predictive power of ESP.

In fact, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Investors interested in the broader Zacks Transportation Sector may check out the following companies with the right combination of elements to beat estimates in the next releases:

Hawaiian Holdings, Inc HA has an Earnings ESP of +5.56% and a Zacks Rank #3. The company will release second-quarter 2018 results on Jul 24. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Old Dominion Freight Line, Inc ODFL has an Earnings ESP of +1.87% and a Zacks Rank #2 (Buy). The company will release second-quarter 2018 results on Jul 26.

C.H. Robinson Worldwide, Inc CHRW has an Earnings ESP of +0.79% and a Zacks Rank #3.  The company will release second-quarter 2018 results on Jul 31.

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