Stifel On Atlas Air: Company Has Lingering Pilot Union Issues, But Stock Still Attractive

Shares of Atlas Air Worldwide Holdings, Inc. AAWW are now trading at prices last seen in 2009 and at a meaningful discount to its closest competitor Air Transport Services Group Inc. ATSG, despite its much larger fleet, according to Stifel.

The Analyst

Stifel’s David Ross maintained a Buy rating on Atlas Air Worldwide while slashing the price target from $54 to $39.

The Thesis

Citing Atlas Air Worldwide’s pilot union woes, Amazon.com, Inc. AMZN has decided to move two planes to a subsidiary of competitor Air Transport Services Group, by the end of the third quarter, Ross said in the note.

He added that the Street had assumed these revenue streams to be “safe,” given that these planes were under a long-term contract.

With Atlas Air Worldwide facing severe pilot union issues leading to penalties and service failures, Amazon’s move is understandable, with the all-importance peak season approaching, the analyst said.

This could have been a good thing for Atlas Air Worldwide, as pilots would suffer with the loss of planes and should cooperate to improve service, Ross noted. He added, however, that “unions aren't rational” and its “unnecessary self-inflicted wounds” could continue to hurt the airline company.

The analyst reduced the EPS estimates for 2019 and 2020 from $5.68 to $5.60 and from $5.97 to $3.92, respectively.

Price Action

Shares of Atlas Air Worldwide were trading 1.21% at $24.50 at the time of publishing.

Related Links:

10 Biggest Price Target Changes For Tuesday

Benzinga's Top Upgrades, Downgrades For September 17, 2019