Air Transport Not Just An Amazon Story

Air Transport Group (ATSG) shares have done well over the past year, but the shares have been stuck in a $6/share trading range since May, as inconsistent execution has blunted some of the benefits of the company’s transformative relationship with Amazon (AMZN). Despite those inconsistencies, management continues to build the business outside of Amazon, adding more 767 customers and launching a long-term effort to expand its potential operating fleet.

I believe Air Transport still has some upside from here, driven by my expectations for high single-digit revenue growth and improving free cash flow generation. I also believe that significant upside remains in the Amazon relationship, as Amazon seems to be serious about building out its independent logistics operations.

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Air Transport Not Just An Amazon Story

Seeking Alpha: Air Transport Group Finally Delivering

It has taken a while, but Air Transport Group (NASDAQ:ATSG) is finally starting to show some of the potential I thought I saw back in September of 2013 and again in March of this year. While the shares are up almost 30% since that March piece, they are up only about 15% over the September piece and lagging the market isn't a cause for celebration.

Air Transport Group appears to be in the right place and if not at the right time, at least at a better point in time. The company has retired its DC-8 fleet, has a solid fleet of 767s and good growth potential in its relationships with Cargojet (OTC:CGJTF) and West Atlantic. Air cargo demand is improving (particularly for mid-sized freighters) and the company should start generating free cash flow this year. I think relatively conservative assumptions can support a fair value well into the $9s, and it is not that hard to get into the low double-digits, and I think there's still further for these shares to go.

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Air Transport Group Finally Delivering

Seeking Alpha: Air Transport Group Looking To Recover From A Choppy Start To The Year

In a time when it seems that almost any stock has gone up, Air Transport Group's (ATSG) 13% decline since my last write-up is particularly disappointing. I continue to believe that this is a well-run air cargo company with meaningful opportunities to improve EBITDA and cash flow, but management must convert "opportunity" to results for this stock to perform better. A couple of recent developments should encourage bulls, and the stock remains at a valuation where I think a closer look is warranted.

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Air Transport Group Looking To Recover From A Choppy Start To The Year