Mesa Air Group Analyst Reveals Concern On Uncertainty About Normalized Earnings Potential

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  • Raymond James analyst Savanthi Syth reiterated an Underperform rating on the shares of Mesa Air Group Inc MESA.
  • Mesa's 4Q22 adjusted EPS of $(0.37) was largely in line with the analyst's $(0.35) estimate.
  • MESA shares surged ahead of and following its 4Q22 earnings release, including the firming of revised agreements with United Airlines Holdings, Inc. UAL and creditors that provide sufficient liquidity until earnings can recover.
  • RelatedMesa Air To End Regional Flights For American Airlines, Finalizing New Deal With United
  • The analyst's concern remains the shrinking of the regional airline opportunity in the U.S. due to the doubling of regional pilot wages and, thus, uncertainty about the normalized earnings potential.
  • The analyst added that elevated training expense is expected to continue, albeit with attrition stabilizing and additional simulator and training capacity coming on line in 2023.
  • The analyst has cut FY23 EPS estimate from $(0.98) to $(1.47) primarily reflecting a higher loss during the transition period.
  • Syth assumes halving of the pre-pandemic earnings power as the pilot supply situation normalizes, with an upside if United decides to reallocate flying to Mesa from other partners.
  • Price Action: MESA shares are trading higher by 14.38% at $1.75 on the last check Tuesday.
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