Air Transport Services Group’s (NASDAQ: ATSG) adjusted pre-tax earnings increased 20% in the second quarter to $125.6 million, beating analyst estimates of $113 million, on the strength of expanded aircraft leasing and flying commitments related to e-commerce.
Adjusted earnings rose 74% to $32.5 million, or 47 cents per share, versus 27 cents per share in the 2019 period, according to the company’s financial results released after Wednesday’s market close. The adjusted per-share earnings beat consensus estimates by 18 cents.
ATSG’s share price closed 3.27% higher and the stock is trading higher in aftermarket sessions as investors see strong fundamentals in the future. All-cargo carriers are in high demand because of the lack of passenger planes in service to help with goods movement and online shopping has increased during the coronavirus pandemic, accelerating the need for aircraft to help sellers meet tight shipping commitments.
The company revised up its adjusted EBITDA guidance for 2020 to at least $470 million because of the strong quarter, which will make up for an expected drop in passenger charter opportunities in the second half.
A big driver of ATSG’s 13% revenue increase to $378 million was increased charter flying for the U.S. government by subsidiary Omni Air, as well as the express networks of Amazon (NASDAQ: AMZN) and DHL. Omni was hired by the government, as well as passenger airlines, to repatriate U.S. residents who were stranded abroad when the coronavirus outbreak led countries to close borders and airlines discontinued regular passenger service. Also contributing top-line growth during the quarter were two new routes flying dedicated carriage to support DHL’s network and deliver pandemic relief supplies between Hong Kong and Sydney and between the U.S. and Europe. Both routes are expected to run for several months.
In June, subsidiary Cargo Aircraft Management agreed to lease 12 more Boeing 767-300 freighters to Amazon for 10-year terms. Air Transport International began operating one of those aircraft for Amazon Air in the second quarter.
ATSG said revenues were partially offset by revenue reductions from Air Transport International’s combi and freighter operations, and from Omni’s military and commercial passenger flights, due to pandemic-related restrictions.
“Near-term pandemic effects aside, ATSG remains a growing, thriving air transport business with substantial growth potential in the coming years,” CEO Rich Corrado said in a statement.
During the quarter, ATSG was awarded a $67 million grant under the U.S. government’s coronavirus relief package to maintain payrolls through the end of September. Air Transport International was also granted $8.3 million due to pandemic-related cuts in its combi service to remote military installations.
It also took a $39 million pre-tax impairment charge to retire four 757 aircraft after a lease with DHL expired; one of the aircraft will remain in service for the rest of 2020.
ATSG said it had to readjust the values of certain financial instruments, creating a non adjusted loss of $105.2 million, or -$1.78 per share.