Why Allegiant Shares Tumbled

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Allegiant Travel Company were losing altitude today, falling as much as 15% after a disappointing earnings report.

So what: The small-market airline posted EPS of $1.34 as revenue increased 10.7% to $255.9 million, but both figures slightly missed expectations as analysts projected per-share profits of $1.36 and sales at $258 million. Despite the sales increase, operating margins fell 130 basis points and net income improved only 2.3% as higher pay for pilots helped push salary and benefits expenses up 12.5%. Increased maintenance and depreciation costs also ate into earnings.

Now what: Aside from the higher pilot pay, which will raise costs for the rest of the year, there don't seem to be any major issues here. Revenue continues to grow at a steady clip, thanks in part to ancillary charges, and passenger miles jumped by 15.5% in the quarter as Allegiant continues to add routes and markets. The stock may be a bit pricey at a P/E of 20, but there's no reason for investors to panic after today's drop.

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The article Why Allegiant Shares Tumbled originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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