Allegiant Airlines Tumbles After Cutting Forecast on Fuel Costs
(Bloomberg) -- Allegiant Airlines tumbled the most in more than a year after higher jet-fuel prices and slower-than expected aircraft deliveries forced the carrier to cut its earnings forecast.
Profit will be between $9 and $10 a share for this year, down from the $10 to $12 expected earlier, the carrier said in a statement, citing $35 million more in fuel costs. Allegiant adjusted its outlook for seat and flight capacity growth to between 9 percent and 11 percent, down from as much as 15 percent previously.
“Allegiant’s new revenue-management system is also not where it needs to be during peak travel days,” Helane Becker, an analyst at Cowen & Co., said in a note to clients. While many of the airline’s problems are transitory, “this is the third year in a row of various one-time, nonrecurring issues affecting earnings growth.” Becker slashed her price target to $142 from $166.
The shares dropped 12 percent to $122.50 at 11:24 a.m. Thursday in New York after falling to as low as $122.30, marking the biggest intraday slump since October 2016. Allegiant is down 21 percent this year, while a Standard & Poor’s index of nine U.S. airlines has declined 9 percent.
Allegiant joins other carriers in paring capacity or profit outlooks as fuel prices jumped about 40 percent over the past 12 months. Slowed aircraft deliveries stymied growth earlier this summer as the carrier switches its fleet to include only planes made by Airbus SE.
The airline, a unit of Allegiant Travel Co., reported second-quarter profit of $3.10 a share after the close of trading Wednesday. That beat the $2.73 average of analyst estimates compiled by Bloomberg. Revenue fell short of analyst expectations, rising 8.7 percent to $436.8 million.
Allegiant said it now plans to add 25 used Airbus planes this year, down from an original 30.
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