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Here's Why You Should Retain Air Transport Services (ATSG) Now

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·3 min read
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Air Transport Services Group, Inc. ATSG has an impressive Growth Score of B. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of quality and sustainability of its growth. For 2022, earnings are expected to grow at a rate of 9.5% on a year-over-year basis.

The stock has moved up 6.1% in the past year compared with 19.8% growth of the industry it belongs to.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Key Growth Drivers

Amid the coronavirus pandemic, e-commerce has gained momentum owing to social-distancing protocols, quarantines and lockdowns. The demand for door-to-door delivery of essentials during this crisis has surged. Despite coronavirus-induced disruptions, the company’s airline operations were strong in 2020. The same is likely to continue throughout 2021. Courtesy of upbeat demand for its cargo aircraft, the company expects 2021 adjusted EBITDA to be at least $525 million. The figure indicates an improvement of 6% from the figure reported in 2020.

The Cargo Aircraft Management segment has been performing well in the past few quarters. Segmental revenues increased 11.2%, 12.2% and 18% in fourth-quarter 2020, the first and the second quarter of 2021, respectively.

Primary Concern

Increasing capital expenditures are limiting bottom-line growth. In 2020, capital spending increased 11.1% to $510.4 million. The amount included $353.4 million on the purchase of 11 Boeing 767-300 jets. The metric stood at $300.2 million, up 12.9% in the first half of 2021. The amount included $200.1 million for the acquisition and modification of passenger aircraft for freighter conversion. In August, management raised the outlook for 2021 capex by $50 million to $550 million. The increase in guidance was led by the company’s commitment to acquire five more passenger aircraft (four Boeing 767-300s and one Airbus A321-200) for conversion.

Zacks Rank & Stocks to Consider

Air Transport Services 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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Air Transport Services Group, Inc (ATSG) : Free Stock Analysis Report

Landstar System, Inc. (LSTR) : Free Stock Analysis Report

Herc Holdings Inc. (HRI) : Free Stock Analysis Report

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Zacks Investment Research