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A month has gone by since the last earnings report for Air Transport Services (ATSG). Shares have lost about 3.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Air Transport Services due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Air Transport Services Group’s Earnings Miss Mark in Q1
Air Transport Services Group’s earnings (excluding 30 cents from non-recurring items) of 19 cents per share fell short of the Zacks Consensus Estimate of 26 cents. Moreover, the bottom line deteriorated 55.8% year over year due to its disappointing revenue performance. Additionally, revenues dipped 3.4% year over year to $376.1 million. The top line also fell short of the Zacks Consensus Estimate of $379.5 million.
The top line was hurt by lower revenues from the ACMI services segment. Before eliminations, revenues from the ACMI services unit declined 13% to $247.13 million. CAM segment increased 12.2% to $83.27 million while revenues from other operations rose 17.1% to $93.69 million.
Notably, revenues from the CAM segment in the reported quarter were bumped up by the external leases of 15 more 767-300 freighters in the reported quarter. Segmental revenues from external customers rose 30% in the March quarter. However, the downside in revenues from the ACMI unit was due to the ramped-down charter passenger operations for the commercial customers of Omni Air and lower 757 combi operations for the military besides the retirement of four Boeing 757 freighters (operated by the company for DHL) in 2020. Due to the coronavirus-induced restrictions, total block hours in the reported quarter declined 5% to approximately 38,000 hours.
The company’s total fleet included 104 aircraft (19 passenger and 85 freighter) in service at the end of the March quarter of 2021 compared with 96 at the end of the first quarter of 2020. Of the 104 planes, 98 were owned by CAM, four were leased to Omni Air by third parties and the remaining two were subleased from a customer.
Total operating expenses dipped 6% in the March quarter to $319.23 million, mainly owing to a 30.6% reduction in expenses on fuel. Capital expenditure declined 12.8% to $125.4 million. The amount included $84.7 million for the purchase of four Boeing 767-300 jets.
The company still expects 2021 adjusted EBITDA to be at least $525 million, indicating an improvement of 6% from the 2020 reported figure of $497 million. Capital expenditures for 2021 are still projected at around $500 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -15.39% due to these changes.
Currently, Air Transport Services has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Air Transport Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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