Buy Air Transport Services Group

Air Transport Service Group (NSDQ: ATSG) is getting ready to take flight. The operator and lessor of cargo planes just signed a contract with Amazon to shuttle a portion of its packages across the U.S. In a move to cement Air Transport’s position as its preferred air partner, Amazon has been granted warrants to purchase up to 19.9% of Air Transport’s stock over the next five years.

While the 20 planes currently under agreement will ignite earnings in 2017, it is quite likely that Amazon will expand the agreement in its effort to control and dominate the next day shipping its customers have grown to expect. For comparison’s sake, Air Transport’s largest customer, DHL, currently employs just 17 planes and makes up 46% of revenue.

Management has conservatively guided to flat earnings in 2016 as it builds out its capacity to handle the demand from Amazon. As the planes are deployed, earnings will skyrocket 40%. Even after the 22% surge in price since the announcement of the deal, Air Transport could see its stock double on the back of Amazon’s growth.

Look for details of my analysis in Profit Catalyst Alert  newsletter published April 19.

Target Price: $28

Stock Talk

Moderator: Navy64Chuck


Hi Linda,

How does the announcement this morning by Atlas Air Worldwide (AAWW) affect ATSG? Possibly different aircraft types?? 747 vs 767? Or just Amazon trying to diversify and/or fill up its capacity box.?


Linda McDonough

Linda McDonough

Amazon is certainly ramping up its efforts to control its doorstep delivery. This agreement is almost identical to ATSG’s. Both deals are to lease 20 of similar model planes. There are very few of these planes, with ATSG owning 32 of the roughly 80 available. This is no way takes away from the ATSG deal. I will certainly look at AAWW as a possible long but at first glance Amazon’s leasing deal with ATSG should have a bigger impact on revenue and earnings as ATSG is a smaller company than AAWW. Thanks for the question and look for more detailed comments in my next issue. Best, Linda

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