Why Allegiant Shares Tumbled
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.
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