Some shipping stocks are acting well in the IBD 50, and a new company to the screen is Air Transport Services Group, a stock to watch as it forms a bullish pattern on record shipping demand.
Air Transport Services is the world's largest owner of converted Boeing 767 aircraft. The company — headquartered in Wilmington, Ohio — operates and leases aircraft primarily for the transportation of cargo.
Air Transport Services is best known for its partnership with Amazon.com, which relies on Air Transport's freight planes for its fast-shipping service, Amazon Prime.
Despite Amazon making up a whopping 30% of Air Transport Service's revenue, an equal share of company revenue also comes from the U.S. government. Federal agencies lease planes for numerous day-to-day operations as well as for unique procedures. One was the American troop withdrawal from Afghanistan.
Air Transport Services reported record year-end results that saw revenue of $1.73 billion, up 10% from a year prior, and a full-year EPS of $1.66. Strong results were reported, as demand for cargo air transport reached record levels during the Christmas holiday season.
Stocks To Watch: Company Extends Contract With DHL
Positive news continued in February as Air Transport Services announced a six-year extension in its leasing partnership with shipper DHL. DHL is the company's third-largest partnership, accounting for 12% of revenue.
Amid strong demand for services, analysts expect earning to continue to grow. The consensus EPS estimates are $2.01 and $2.18 in 2022 and 2023, respectively. Air Transport Services is preparing for this expansion by announcing an agreement last week with Boeing to buy four new 767s.
With both e-commerce and military demand expected to remain strong, Air Transport Services should have no issue leasing out its planes. Even if this landscape drastically changes, the company has some protection in the short term. Deposits have already been paid on almost all its aircraft over the next two years, and over half the Airbus A330 aircraft that are expected to be deployed in 2024.
A Stock To Watch As It Forms Bullish Pattern
Shares of Air Transport Services are forming a three-weeks-tight pattern. This pattern of tight trading is especially unique considering the overall volatility in the current market. It is a bullish sign. As Air Transport Services nears its 32.83 buy point, it is a stock to watch.
