Allegiant (ALGT) Stock Gains in Friday's Trading: Here's Why

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Shares of Allegiant Travel Co. ALGT inched up in Friday’s (Jun 17, 2022) trading, gaining 2.59% from Thursday’s closing. The elevation led the stock to close the session at $117.

The upsurge was owing to the highly impressive traffic numbers posted by Allegiant, currently carrying a Zacks Rank #3 (Hold), for May. Driven by upbeat air-travel demand in the United States, ALGT carried 40% more passengers, system-wide, in the month than a year ago. Moreover, load factor (% of seats filled with passengers) of 86.6% was the highest in the said period since the onset of the pandemic.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Available seat miles (a measure of capacity) increased 17.1% year over year for the total system as ALGT expands capacity to meet increased demand. In sync with ALGT’s capacity-expansion efforts, capacity for scheduled operations increased 15.5% in May 2022 from the May 2019 actuals (pre-coronavirus era).

More evidence of the buoyant demand scenario is that load factor (for scheduled operations) in May 2019 was 3 points lower than the May 2022 reading of 83.6%. Load factor for June is estimated to be roughly 90%.

Departures across the total system increased 9.3% year over year in May. Due to the increase in oil price, the average fuel price per gallon was $4.41 in May, compared with $4.15 in April. ALGT now expects average fuel price per gallon for the June quarter to be $4.30 (earlier estimate was $4).

Due to increased flight cancellations as a result of labor crunch and a spike in COVID-19 cases, ALGT expects second-quarter 2022 operating revenues to increase roughly 28% from the second-quarter 2019 actuals, which matches the lowest end of the previous estimate of an increase in the 28-32% range.

System-wide capacity is now expected to increase 11.5% from the level recorded in the June quarter of 2019 (earlier estimate was an increase in the 9-13% range). Operating cost per available seat miles (excluding fuel and profit-sharing) is now expected to increase roughly 15% from second-quarter 2019 actuals (earlier guidance was an increase in the 12-16% range).

Airline Stocks to Consider

Below we present some better-ranked stocks in the Zacks Airline industry:

Southwest Airlines LUV: Continued recovery in air-travel demand bodes well for LUV. Anticipating a steady improvement in its bookings, the carrier expects to reap profits in the remaining three quarters of 2022 and during the full year.

LUV’s management predicts operating revenues to increase 12-15% in the second quarter of 2022 from the comparable period’s level in 2019. LUV is seeing strong bookings for the spring and summer trips.

The positivity surrounding the Southwest Airlines stock is evident from the Zacks Consensus Estimate for current-year earnings being revised above 100% upward over the past 60 days. LUV has a Growth Style Score of B. Southwest Airlines currently sports a Zacks Rank #1.

Alaska Air Group ALK: Like LUV, ALK is benefiting from upbeat air-travel demand despite high fuel costs and the resultant northward movement of airfares. On the back of higher air-travel demand and favorable pricing, Alaska Air lifted its revenue outlook for the second quarter of 2022.

ALK currently expects total revenues to increase 12-14% from the second-quarter 2019 actuals. The earlier expectation was a 5-8% increase. Driven by favorable demand, load factor is anticipated in the 87-88% range (earlier expectation was in the 85-88% band).

Revenue passengers are likely to be down in the 9-10% band. The earlier expectation was a 10-12% decrease. Moreover, Alaska Air’s expansion and fleet modernization initiatives to cater to the recovery in travel demand are encouraging. Alaska Air currently flaunts a Zacks Rank #1.

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