What happened
Cargo and charter specialist Air Transport Services Group (ATSG 1.41%) reported a stronger-than-expected quarter and raised its full-year guidance. Investors are reacting by sending the stock airborne, with the shares up more than 12% on Friday afternoon.
So what
ATSG is a provider of aircraft leasing and air cargo services, ranking as the world's largest owner and operator of Boeing 767 freighters. The company earned $0.57 per share in the second quarter on revenue of $529 million, outpacing the consensus estimate for $0.36 per share on sales of $515 million.
Revenue was up 4% year over year and adjusted earnings before interest, taxes, depreciation, and amortization EBITDA remained steady despite some inflation on the cost side of the business.
The company is benefiting from its expansion plan, operating 13 more 767 freighters as of June 30 than it did a year ago. There is more growth to come.
"We remain confident in executing our plan to lease nineteen newly converted freighters in 2023, including nine leased to date," CEO Rich Corrado said in a statement. "We continue to expect attractive returns on what we now project will be $785 million in 2023 capital spending, down $65 million compared with prior guidance."
Now what
ATSG raised its full-year earnings guidance to between $1.65 and $1.80 per share, from $1.55 to $170 per share. That suggests some upside to the $1.62-per-share consensus estimate.
The fundamental driver of demand for these midsize air freighters is e-commerce, and the push by more companies to rapidly fulfill orders. Corrado calls ATSG's freighters, including the 767s as well as Airbus A321s and A330s, "the most efficient and reliable solutions" as shippers look to replace older, less fuel-efficient equipment.
An investment in ATSG is a bet that these trends will continue. Based on Friday's price move, investors are feeling optimistic about ATSG's chances.
