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Here's Why You Should Retain Air Transport Services (ATSG)
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Air Transport Services (ATSG - Free Report) is benefiting from fleet modernization and expansion initiatives. The expansion of ATSG's role in in the Amazon Air network is a major tailwind. However, weak airfreight demand is a major headwind.
Factors Favoring ATSG
Air Transport Services’commitment to rewarding shareholders through buybacks is praiseworthy. In November 2022, ATSG's board approved a new $150 million share repurchase authorization, replenishing its exhausted buyback capacity. By the end of 2023, ATSG repurchased 7.4 million shares.
The expanded agreement with Amazon (AMZN - Free Report) is a major tailwind for ATSG. Starting this summer, Air Transport Serviceswill operate 10 Boeing 767-300 freighters provided by Amazon, with the potential for 10 more aircraft. ATSG raised its 2024 adjusted EBITDA guidance by $10 million to around $516 million, expecting increased flying opportunities from these aircraft.
The expansion of Air Transport Services’fleet is promising. At the end of 2022, Air Transport Services had a total of 128 aircraft in service (18 passengers and 110 freighters), up from 117 at the end of 2021. By the end of 2023, the fleet size increased to 129 aircraft (18 passenger planes and 111 freighters). The company expects to end 2024 with 137 aircraft in service, including 118 freighters and 19 passenger planes.
Key Risks
Air Transport Servicesis facing challenges due to weak demand for cargo aircraft. Decreased demand in both the leasing segment and passenger airline operations is impacting the company's performance. Additionally, the ongoing Israel-Hamas conflict is expected to further affect its results.
ATSG's liquidity position is a concern. At the end of the first quarter of 2024, Air Transport Services’ current ratio (a measure of liquidity) was 0.5. A current ratio of less than 1 is not desirable as it implies that it has insufficient capital to pay off its short-term debt.
The company primarily operates through two reporting segments — Cargo Aircraft Management (“CAM”) and ACMI (aircraft, crew, maintenance and insurance) Services. Revenues from ACMI Services decreased by 3.1% year over year to $323.8 million. Revenues from CAM dropped by 5.8% to $105.5 million, while other operations saw a 1.9% decline to $109 million.
A glimpse at Air Transport Services’ price trend reveals that its shares have risen 36.3% in the past year compared with its industry’s 16.1% appreciation.
SkyWest has an expected earnings growth rate of 787% for the current year.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 98.4% in the past year.
KEX has an expected earnings growth rate of 42.2% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of Kirby have climbed 55.7% in the past year.
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Here's Why You Should Retain Air Transport Services (ATSG)
Air Transport Services (ATSG - Free Report) is benefiting from fleet modernization and expansion initiatives. The expansion of ATSG's role in in the Amazon Air network is a major tailwind. However, weak airfreight demand is a major headwind.
Factors Favoring ATSG
Air Transport Services’commitment to rewarding shareholders through buybacks is praiseworthy. In November 2022, ATSG's board approved a new $150 million share repurchase authorization, replenishing its exhausted buyback capacity. By the end of 2023, ATSG repurchased 7.4 million shares.
The expanded agreement with Amazon (AMZN - Free Report) is a major tailwind for ATSG. Starting this summer, Air Transport Serviceswill operate 10 Boeing 767-300 freighters provided by Amazon, with the potential for 10 more aircraft. ATSG raised its 2024 adjusted EBITDA guidance by $10 million to around $516 million, expecting increased flying opportunities from these aircraft.
The expansion of Air Transport Services’fleet is promising. At the end of 2022, Air Transport Services had a total of 128 aircraft in service (18 passengers and 110 freighters), up from 117 at the end of 2021. By the end of 2023, the fleet size increased to 129 aircraft (18 passenger planes and 111 freighters). The company expects to end 2024 with 137 aircraft in service, including 118 freighters and 19 passenger planes.
Key Risks
Air Transport Servicesis facing challenges due to weak demand for cargo aircraft. Decreased demand in both the leasing segment and passenger airline operations is impacting the company's performance. Additionally, the ongoing Israel-Hamas conflict is expected to further affect its results.
ATSG's liquidity position is a concern. At the end of the first quarter of 2024, Air Transport Services’ current ratio (a measure of liquidity) was 0.5. A current ratio of less than 1 is not desirable as it implies that it has insufficient capital to pay off its short-term debt.
The company primarily operates through two reporting segments — Cargo Aircraft Management (“CAM”) and ACMI (aircraft, crew, maintenance and insurance) Services. Revenues from ACMI Services decreased by 3.1% year over year to $323.8 million. Revenues from CAM dropped by 5.8% to $105.5 million, while other operations saw a 1.9% decline to $109 million.
A glimpse at Air Transport Services’ price trend reveals that its shares have risen 36.3% in the past year compared with its industry’s 16.1% appreciation.
Image Source: Zacks Investment Research
Zacks Rank
ATSG currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportationsector include SkyWest (SKYW - Free Report) and Kirby Corporation (KEX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
SkyWest has an expected earnings growth rate of 787% for the current year.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 98.4% in the past year.
KEX has an expected earnings growth rate of 42.2% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of Kirby have climbed 55.7% in the past year.