Atlas Air Worldwide Holdings (AAWW) Tops Q1 EPS by 6c

Atlas Air Worldwide Holdings (NASDAQ: AAWW) reported Q1 EPS of $0.31, $0.06 better than the analyst estimate of $0.25. Revenue for the quarter came in at $418.62 million versus the consensus estimate of $419.81 million.

“Our first-quarter adjusted EPS was in line with our expectations and our outlook for adjusted EPS growth in 2016, including the immediate earnings contribution we expect from our acquisition of Southern Air Holdings, which we closed on April 7,” said William J. Flynn, President and Chief Executive Officer.

“As we also announced today, we are excited to begin a strategic, long-term relationship with Amazon.

“Our agreements with Amazon to provide and to operate 20 Boeing 767-300 converted freighters, in support of the continuing expansion of Amazon’s e-commerce business and to enhance its customer-delivery capabilities, are expected to be meaningfully accretive to our future earnings and cash flows. We expect this service to begin in the second half of this year, become accretive starting in 2017, and scale up to full service and full accretive benefits through 2018.

“In addition to being immediately accretive, our acquisition of Southern Air with its highly complementary 777 and 737 aircraft operating platforms will provide a broader array of services for customers and new avenues of business growth for us.

“We are eager to capitalize on our ongoing initiatives and our opportunities with Amazon and Southern to drive substantial value and benefit for customers.”

Outlook

Consistent with our prior outlook, we continue to expect our adjusted EPS in 2016, before necessary startup expenses and the impact of initial warrants for our new Amazon service, to increase by a low- to mid-single-digit percentage rate compared with 2015 adjusted EPS of $5.01.

Our view reflects the demand we are currently seeing for our services and aircraft, the benefits we expect from our fleet initiatives and debt refinancings in 2015, and the accretion we anticipate from our acquisition of Southern.

As we commence our new service for Amazon, we will incur an EPS impact for necessary startup expenses and the issuance of warrants. As a result, we now expect that our adjusted EPS in 2016 will be a few percentage points lower than our adjusted EPS in 2015.

Given the inherent seasonality of airfreight demand, we expect the majority of our earnings in 2016 to be generated in the second half. Unlike 2015, which benefited from increased first-half demand driven by U.S. West Coast port congestion, we anticipate that results in 2016 will be more reflective of historical patterns, with approximately three-quarters of our adjusted EPS occurring in the second half.

In addition, we expect earnings per share in the second quarter of 2016 to be approximately three times the level of our first-quarter 2016 adjusted EPS of $0.31.

For the full year, we continue to expect total block hours including Southern Air to increase more than 20% compared with 2015, with about 75% of our 2016 hours in ACMI and the balance in Charter.

Results in our Dry Leasing segment will benefit from the addition of two converted 767 freighters to our portfolio in December 2015 and February 2016, which we are also operating on a CMI basis.

Including Southern, aircraft maintenance expense in 2016 should total approximately $195 million, and depreciation is expected to total approximately $145 million. In addition, we anticipate an effective book income tax rate of approximately 32%. Core capital expenditures, excluding aircraft and engine purchases, are expected to total $50 to $60 million, mainly for spare parts for our fleet

For earnings history and earnings-related data on Atlas Air Worldwide Holdings (AAWW) click here.

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