Our first idea is an airline that beat Wall Street’s earnings forecasts by $0.33 last quarter. Our second recommendation is some profit-taking.
Buy: Atlas Air Worldwide Holdings, Inc. (AAWW)
From Upside
Atlas Air Worldwide Holdings, Inc. (AAWW) operates a fleet of cargo and passenger planes used by such customers as Amazon.com. In 2018, Atlas Air reported record highs for annual per-share profits, sales, and operating cash flow—and all three metrics climbed at least 20% in the March quarter. The source of that growth is not big acquisitions; deal activity has been sparse aside from the $106 million purchase of smaller rival Southern Air in 2016. Nor has the company relied on stock buybacks to juice per-share profit growth; its share count has actually risen in the past year.
Atlas Air’s operating momentum is being powered by robust demand for airfreight from online purchases and air travel. Last year, global airline passenger traffic rose 8% and cargo traffic 10%, while the company’s growth in block hours rose 20%. For 2018, Atlas Air expects block-hour growth of 21%, versus 7% higher passenger traffic and 6% higher cargo traffic. A proxy for volume, block hours measure the time between a plane departing from one terminal and arriving at another.
Encouragingly, Atlas Air boosted its profit outlook on June 25 for both the June quarter and 2018. Rising analyst estimates projected the company to report earnings per share of $1.22, up 12%, on revenue growth of 23%. Atlas Air is a Best Buy.
Richard J. Moroney, CFA, Upside, www.upsidestocks.com, 800-233-5922, August 2018