The holding company of regional air carrier Mesa Airlines, Mesa Air Group, Inc. (NASDAQ: MESA) recently delivered lower-than-expected numbers for the fourth quarter on both its top-line and bottom-line fronts.
Q4 revenue increased 21% year-over-year to $130.8 million, but fell short of the analysts’ estimates by $20 million. The growth in revenue came from higher block hour volumes for the company’s major customers.
The company reported a net loss per share of $0.06, missing analysts’ expectations by $0.18. The net loss was attributed to increased heavy airframe maintenance expenses, coupled with higher maintenance parts and pilot training expenses.
According to the management, some of the major challenges amid the current COVID-19 pandemic include, rapid contraction and expansion of demand, labor supply, and price gyrations in the supply chain.
With these developments in mind, let us take a look at the changes in MESA’s key risk factors that investors should know.
Risk Factors
According to the TipRanks Risk Factors tool, MESA’s top two risk categories are Finance & Corporate and Production, contributing 38% and 33% to the total 48 risks identified, respectively.
In its recent annual report, the company has added one key risk factor under the Production risk category. Compared to a sector average of 19%, MESA’s Production risk factor is at 33%.
MESA highlighted that its operations depend on qualified personnel including maintenance technicians. Its maintenance technicians could seek opportunities at airlines that offer higher pay and benefit programs, against regional airlines.
Mechanic attrition coupled with difficulty hiring and retaining qualified maintenance staff could adversely impact MESA’s business and financials.
Wall Street’s Take
On December 10, Deutsche Bank analyst Michael Linenberg decreased the stock’s rating to Hold from Buy, and lowered the price target to $7 from $15 (21% upside potential).
The analyst sees MESA incurring losses over the next two quarters due to cost challenges stemming from staffing and maintenance expenses.
Consensus on the Street is a Moderate Buy based on 1 Buy and 2 Holds for the stock. The average MESA Air Group price target of $8.83 implies a potential upside of 52.6%. That’s after a near 39.5% slide in MESA’s share price over the past six months.
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