Atlas Air Worldwide Holdings (AAWW) Misses Q2 EPS by 13c

Atlas Air Worldwide Holdings (NASDAQ: AAWW) reported Q2 EPS of $0.80, $0.13 worse than the analyst estimate of $0.93. Revenue for the quarter came in at $443.3 million versus the consensus estimate of $473.86 million.

Outlook

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 currently expect that our adjusted EPS from continuing operations in 2016 will be lower than our adjusted EPS in 2015 by a high-single-digit percentage.

Our view also reflects anticipated demand for our services and aircraft, the benefits that we expect from our fleet initiatives and debt refinancings in 2015, and accretion from our acquisition of Southern Air. In addition, it reflects our decision to sell a subsidiary that we acquired in connection with our acquisition of Southern Air and whose results are presented as a discontinued operation.

Excluding the anticipated impact from Amazon startup expenses and from Southern Air’s operations on EPS in 2016, as well as West Coast port congestion-related earnings in 2015, we anticipate that adjusted EPS in our base business will grow by a low- to mid-single-digit percentage in 2016.

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 slightly more than three-quarters of our adjusted EPS occurring in the second half.

In addition, we expect adjusted earnings per share in the third quarter of 2016 to be approximately 20% to 25% of our full-year 2016 adjusted EPS.

Looking to the fourth quarter of 2016, we expect adjusted EPS to benefit from substantially lower maintenance expense compared with the fourth quarter of 2015; our acquisition of Southern Air in April 2016; the addition of our tenth 747-8F, which entered our fleet midway through the fourth quarter of 2015; and the addition of two converted 767 freighters to our Dry Leasing portfolio in December 2015 and February 2016, which we are also operating on a CMI basis.

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

Including Southern Air, aircraft maintenance expense in 2016 should total approximately $200 million, and depreciation and amortization is expected to total approximately $145 million. In addition, we anticipate an effective book income tax rate of approximately 31%. Core capital expenditures, excluding aircraft and engine purchases, are expected to total approximately $62 to $67 million, mainly for spare parts for our fleet.

We provide guidance on an adjusted basis because we are unable to predict, with reasonable certainty, the effects of the warrants issued to Amazon or certain other significant items that could be material to our reported results.

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

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