Allegiant Travel Company (NASDAQ:ALGT) is scheduled to report first-quarter 2018 earnings numbers on Apr 25, after the market closes.
In the fourth quarter of 2017, the company’s earnings came in at $2.71 per share, outpacing the Zacks Consensus Estimate of $1.78. The bottom line also increased 9.3% on a year-over-year basis. Results were aided by higher revenues.
Quarterly revenues improved 12.7% year over year to $378.6 million, surpassing the Zacks Consensus Estimate of $377.6 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 company's bottom line in the soon-to-be reported quarter. The rise in fuel costs, which is expected to be $2.18 per gallon in the first quarter, also does not bode well for the stock.
Moreover, woes related to capacity expansion raise major concerns. For the first quarter of 2018, the company expects average seat miles (scheduled and system) to grow between 10% and 14% year over year. The Zacks Consensus Estimate for first-quarter capacity is pegged at 3,763 million, higher than 3,431 million in fourth-quarter 2017.
Additionally, we expect a detailed commentary on CBS News' recent report, "60 Minutes", which painted a gloomy picture of the airlines alleging that it was facing a number of safety-related issues. The damaging television program was aired on Apr 15. The allegations are being investigated by the likes of Kaplan Fox & Kilsheimer LLP.
However, the company’s efforts to reward shareholders through share buybacks and dividend payments are impressive. Its fleet modernization initiatives are encouraging as well.
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.
Zacks ESP: Allegiant has an Earnings ESP of -1.09% as the Most Accurate estimate is pegged at $2.97 per share, lower than the Zacks Consensus Estimate of $3.00. 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 #3, which increases the predictive power of ESP. However, a company needs to have a positive ESP to be confident about an earnings surprise.
Conversely, we caution against all Sell-rated stocks (#4 or 5) 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. (NASDAQ:HA) has an Earnings ESP of +2.57% and a Zacks Rank #3. The company will release first-quarter 2018 results on Apr 24. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Spirit Airlines, Inc. (NYSE:SAVE) has an Earnings ESP of +2.46% and a Zacks Rank of 3. The company will release first-quarter 2018 results on Apr 26.
Copa Holdings, S.A. (NYSE:CPA) has an Earnings ESP of +0.75% and a Zacks Rank #3. The company is scheduled to release first-quarter results on May 9.
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