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first-quarter results missed Wall Street’s forecasts for revenues and earnings, but that doesn’t seem to be bothering investors.
The low-budget airline offers pure-play exposure to domestic leisure travel—a segment that is fueling the industry’s recovery. Several analysts issued positive takes on the quarter and raised earnings estimates.
Shares of Allegiant (ticker: ALGT) were up 5% to $241 in trading on Wednesday. The stock has gained 27% this year, beating the 25% gain for the NYSE Arca Airline Index.
On Tuesday, Allegiant reported revenue of $279 million in the first quarter, missing consensus forecasts for $294 million, according to FactSet. The airline posted a loss of $3.58 a share against estimates for a loss of $3.10.
Yet the top- and bottom-line figures don’t appear to matter as much as Allegiant’s path back to profits and its expansion plans, including new routes and more planes in its fleet. The company’s balance sheet is also holding up nicely.
Allegiant said its cash balance will more than double by the end of the second quarter, reaching $1 billion. And the company predicted that it will post positive Ebitda (earnings before interest, taxes, depreciation, and amortization) for the rest of the year, including $100 million of Ebitda in the second quarter. It’s also forecasting positive per-share earnings for the rest of 2021.
Like other airlines benefiting from broad-based increases in air travel, Allegiant is seeing operational improvements, including load factors on flights in April that were 10 percentage points higher than in March (referring to the percentage of flights with ticketed passengers).
Allegiant said it is adding 51 new routes, including vacation destinations like Jackson Hole, Wyoming, and Key West, Florida. The airline also said that bookings in April “continued to roar,” rising 8% above April 2019. And Allegiant is adding more planes to its fleet, planning to add five new aircraft in the second quarter, taking its total fleet count to 105 by the end of June. The company buys used planes and said prices are being discounted by 30% from pre-pandemic levels.
Analysts largely applauded the results.
Seaport Global Securities’ Daniel McKenzie reiterated a Buy rating and $296 target on the stock. “We’re walking away with increased conviction on the strength and durability of ALGT’s profit recovery and that consensus has to go up significantly even after moderating our 2021 outlook,” he wrote in a note.
Raymond James’ Savanthi Syth maintained a Strong Buy on the stock, using a Star Wars reference to bolster her case: “The force is strong in this one.” Allegiant, she added, is in a “unique position to generate higher profitability in 2022 than in 2019,” due to its favorable exposure to the leisure market and opportunity to lower operating costs.
Syth also likes the airline’s capital structure and balance sheet, noting that Allegiant hasn’t diluted its equity. She raised her 2021 EPS estimate from a loss of 40 cents a share to a full-year profit of $4.07 a share. She sees huge gains in 2022, expecting the airline to earn $16.25 a share.
Cowen’s Helane Becker also reiterated an Outperform rating on the stock and $275 target. “Allegiant will benefit from travel to Florida, Arizona, California and other mountain and resort destinations,” she writes. It’s also likely the airline’s customers will travel more often, she adds, since its fares are low enough to encourage multiple trips.
Write to Daren Fonda at daren.fonda@barrons.com
