10 Worst Airline Stocks To Buy According to Short Sellers

8. Air Transport Services Group, Inc. (NASDAQ:ATSG)

Short Interest as % of Shares Outstanding: 5.48%

Number of Hedge Fund Holders: 14

Air Transport Services Group, Inc. (NASDAQ:ATSG) is an Ohio-based prominent provider of aircraft leasing and air cargo services, both domestically and internationally. With a fleet that includes converted freighter models such as the Boeing 767 and Airbus A321, it has established itself as a key player in the freighter leasing market.

The company operates through two main segments, Cargo Aircraft Management Inc. and ACMI Services. In addition to leasing aircraft, the company offers flight crews, insurance, and maintenance services, and even conducts aircraft conversions from passenger to freighter configurations. Its diverse client base includes delivery companies, freight forwarders, airlines, and government entities.

Air Transport Services (NASDAQ:ATSG) has faced challenges in recent months. In its second quarter, the company reported revenues of $488 million, a decline from $529 million in the same period last year. The drop in demand for air cargo services can be attributed to broader economic uncertainties and geopolitical issues, including ongoing conflicts like the situation in the Middle East. As a result, aircraft leasing and related revenues fell by 7%, despite the addition of fourteen new freighter leases during the quarter.

It is among the worst airline stocks according to short sellers. The ACMI Services segment reported a pretax loss of $7 million in the second quarter, a significant turnaround from the $24 million in earnings recorded a year prior. Additionally, ACMI Services faced rising expenses related to crew training, maintenance, and ground service rates, which compounded the challenges in this segment.

Despite these hurdles, analysts see potential in the company’s outlook. On August 12, Truist analyst Michael Ciarmoli raised the price target for Air Transport Services (NASDAQ:ATSG) from $14 to $15 and maintained a Hold rating.

The analyst mentioned that while the second quarter’s revenue fell short of expectations, the company exceeded its EBITDA and earnings per share estimates. The outlook for 2024 has also been adjusted positively, with expectations for approximately $526 million in adjusted EBITDA, which is a sign of an increase driven by recent aircraft leases and anticipated pricing improvements in the fourth quarter.

CEO Mike Berger expressed confidence that the company is on track to meet its revised goals, with an expectation for seasonal charter opportunities to enhance the performance of the ACMI Services segment. In the first half of the year, Air Transport Services (NASDAQ:ATSG) generated $107 million in positive free cash flow, and management anticipates further additions in the second half.