August 3, 2020 BARRON’S 11
PREVIEW
ALLEGIANT’S PANDEMIC FORMULA
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Monday 8/
American International Group,
Clorox, Global Payments, HSBC
Holdings, McKesson, SBA Commu-
nications, Take-Two Interactive
Software,andTyson Foodsreport
quarterly results.
The Institute for SupplyManage-
ment releases its Manufacturing Pur-
chasing Managers’ Index for July. Con-
sensus estimate is for a 53.6 reading, up
from June’s 52.5. The June data re-
versed three months when the index
was below the expansionary level of 50.
The Census Bureaureports residen-
tial construction spending data for
June. Expectations are for a 1.3% rise
to a seasonally adjusted annual rate of
$1.37 trillion.
Tuesday 8/
Activision Blizzard, Emerson Elec-
tric, Fox, Incyte, Pioneer Natural
Resources, Prudential, Sony, Vul-
can Materials, Walt Disney,and
Zimmer Biomet Holdings..................
earnings.
Wednesday 8/
AmerisourceBergen, BorgWarner,
CVS Health, Honda Motor, Metlife,
Regeneron Pharmaceuticals, Sem-
pra Energy, Welltower,andWest-
ern Digitalreport quarterly results.
ISM releasesits Non-Manufacturing
Purchasing Managers’ Index for July.
Consensus estimate is for a 55.8 read-
ing, edging down from June’s 57.1.
Thursday 8/
Becton Dickinson, Booking Hold-
ings, Bristol-Myers Squibb, Illu-
mina, Motorola Solutions, T-Mobile
US, Toyota Motor, ViacomCBS,and
Zoetisreport earnings.
The Bank of Englandannounces its
monetary-policy decision. The central
bank is expected to keep its key interest
rate at a record low 0.1%
The Department of Laborreports
initial jobless claims for the week end-
ing on Aug. 1. Claims remain above the
one million mark, which would have
been a record high before this year. In
the last two weeks of July, jobless
claims rose from the preceding week
for the first time since peaking at 6.
million in late March, as parts of the
country shuttered again due to rising
Covid-19 cases.
Friday 8/
Ameren, EOG Resources, Kimco
Realty,andVentashold conference
calls to discuss earnings.
The Bureau of LaborStatistics re-
leases the jobs report for July. Econo-
mists forecast a gain of two million
nonfarm jobs, adding to June’s 4.8 mil-
lion jump. The unemployment rate is
expected to fall to 10.5% from 11.1%.
The unemployment rate hit a record
high 14.7% in April.
The Federal Reservereleases con-
sumer credit data for June. Outstand-
ing consumer credit has fallen for three
consecutive months as the pandemic
has cut into consumer spending.
Coming Earnings
Consensus Estimate Year agoMClorox (Q4) $1.98 $1.Range Resources (Q2) -0.15 0.Realty Income (Q2) 0.80 0.TActivision Blizzard (Q2) 0.69 0.Alleghany (Q2) 4.36 12.Arista Networks (Q2) 1.95 2.More Earnings on Page M32.Consensus Estimate
Day Consensus EstLast PeriodM June Construction Spending 1.3% -2.1%T June Factory Orders 6.1% 8.0%W June Trade Balance -$53.7 bil -$54.6 bilF July Nonfarm Payroll 2,000,000 4,800,July Unemployment Rate 10.5% 11.1%June Consumer Credit $8.0 bil -$18.3 bilUnless otherwise indicated, times are Eastern. a-Advanced;
f-Final; p-Preliminary; r-Revised Source: FactSetFor more information about coming economic reports- and what they mean - go to Barron’s free Economic
Calendar at http://www.barrons.com
ADP releases its National Employment report
for July. Economists forecast that the economy
added 2.1 million private-sector jobs, building on June’s gain of 2.37 million.
Wednesday
Where Budget
Meets Leisure
Allegiant Travelhas been the best-performing airline stock
this year. Never heard of it? It’s a budget airline with a leisure
passenger base, and its shares are downonly36%, less than
full-serviceUnited Airlines Holdings,Delta Air Lines,
andAmerican Airlines Group, all off more than 55%, and
leisure-focusedJetBlue, down 46%, andSouthwest Air-
lines, down 43%. True, Allegiant did just report a wider-
than-expected quarterly loss of $5.96 a share on sales plung-
ing 73% from 2019’s second quarter.
Despite that loss, Raymond James analyst Savanthi Syth
sticks by her Strong Buy on the stock and a $135 price tar-
get, 20% above the recent $112. Allegiant’s secret: flexible
scheduling and ultralow-cost operations that should enable
it to reachcash break-even earlierthan the pack. “Wecon-
tinue to believe Allegiant is the best positioned U.S. airline
relative to its scheduled service peers,” she writes.
The flight might be rough. Travel demand slowed as
Covid cases spiked. Allegiant expects to lose upward of $
million a day in the third quarter, furlough as many as 275
pilots, and delay construction on a Florida resort. Allegiant
has $750 million in cash, Syth estimates, and its passen-
gers have less exposure to coastal cities that “likely have
more circumspect attitudes toward the pandemic.” So
while cutting 2020 earnings estimates, she left 2021 at
$10.50 a share. A 14 times multiple gets her to $135 a share
(discounted 10%).
Cowen’s Helane Becker is not as upbeat, dropping her
price target from $105 to $104 as the airline heads into the
weakest part of the year for bookings. “We expect a challeng-
ing [third quarter],” she says.—Daren Fonda
Turbulent Skies
Noairlinestockshavefaredwell
during the pandemic, but Allegiant
hasperformedbetterthanitslarger
peers.
Sources: FactSet; Department of Homeland
Security
Empty Planes
Air passengers moving through TSA
checkpoints plunged in mid-March
andstruggledtorecoverinmid-May.
U.S. Airline Stocks, YTD 2020
ALGT
LUV
JBLU
AAL
UAL
Jan. F M A M J J
0
25%
.
March April May June July
2.5 Mil
TSA Checkpoint Travel Numbers,
MarchtoJuly
Illustration by Elias Stein