Airline Transport Services (ATSG) Upgraded to Strong Buy: Here’s Why

Air Transport Services (ATSG) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #1 (Strong Buy). An upward trend in earnings estimates – one of the most powerful forces impacting stock prices – triggered this rating change.

The Zacks rating is based solely on the evolution of a company’s earnings. It tracks EPS estimates for the current year and beyond from sell-side analysts covering the stock through a consensus metric – the Zacks Consensus Estimate.

Individual investors often find it difficult to make decisions based on rating upgrades by Wall Street analysts, as these are primarily driven by subjective factors that are difficult to see and measure in real time. In these situations, the Zacks rating system is useful because of the power of a changing earnings picture to determine short-term stock price movements.

As such, Zacks’ rating upgrade for airline services is essentially a positive commentary on its earnings outlook that could have a favorable impact on its share price.

The most powerful force impacting stock prices

Changes in a company’s future earnings potential, as reflected in earnings estimate revisions, have been found to be strongly correlated with short-term changes in its share price. This is partly because of the influence of institutional investors who use earnings and earnings estimates to calculate the fair value of a company’s stock. An increase or decrease in earnings estimates in their valuation models simply translates to a higher or lower fair value for a stock, and institutional investors typically buy or sell it. Their mass investment action then leads to a price movement for the stock.

Fundamentally speaking, the rise in earnings estimates and the consequent upgrade in the air transport services rating implies an improvement in the company’s underlying business. Investors should show their appreciation for this improving trading trend by pushing the stock higher.

Harnessing the Power of Earnings Estimate Revisions

As empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock movements, tracking these revisions to make an investment decision could be truly rewarding. This is where the proven Zacks Rank stock rating system plays an important role, as it effectively harnesses the power of earnings estimate revisions.

The Zacks Rank stock rating system, which uses four factors tied to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive track record. externally audited record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988. You can see the full list of Zacks #1 Rank (Strong Buy) stocks today here >>>> .

Revisions to profit estimates for air transport services

This air cargo company is expected to earn $1.67 per share for the fiscal year ending December 2021, representing a year-over-year change of -2.9%.

Analysts have steadily increased their estimates for air transport services. Over the past three months, Zacks’ consensus estimate for the company has risen 3.9%.

Conclusion

Unlike overly optimistic Wall Street analysts whose rating systems tend to favor favorable recommendations, the Zacks rating system maintains an equal proportion of “buy” and “sell” ratings for its entire universe of over 4 000 shares at any time. Regardless of market conditions, only the 5% of stocks covered by Zacks earn a “Strong Buy” rating and the next 15% earn a “Buy” rating. Thus, placing a stock in the top 20% of stocks covered by Zacks indicates its superior earnings estimate revision function, making it a strong candidate for delivering above-market returns in the short term.

You can read more about the Zacks Ranking here >>>

Upgrading Airline Services to a Zacks No. 1 rank positions it in the top 5% of stocks covered by Zacks in terms of estimate revisions, implying the stock could rise in the near term.

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