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Feb. 14, 2004, 4:04 p.m. EST

Barron's: ABX Air has prospects

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By CBS MarketWatch

SAN FRANCISCO (CBS.MW) -- Long-term contracts boost ABX Air's potential for higher sales, making the cargo airline a good investment prospect, Barron's said in its Sizing Up Small Caps column Saturday.

The Wilmington, Ohio, company was guaranteed business from its former parent, Airborne, over the course of seven years, around the time DHL Worldwide acquired Airborne, the report said.

DHL Worldwide, a unit of postal service provider Deutsche Post , bought Airborne in August of last year for just over $1 billion, but it wasn't able to acquire Airborne's fleet of planes due to a U.S. law that won't allow a foreign firm from owning more than 25 percent of a domestic airline, Barron's said.

For those services ABX provided under its guaranteed business, it would also be reimbursed its cost, plus a base markup of 1.75 percent that could climb even higher, the report said.

And under a separate agreement where ABX would provide package handling and related services for three years, the company was guaranteed more markups and would be reimbursed for fuel costs and interest rates.

Even ABX's earnings are completely untaxed, and they will continue to be for several years, Barron's said, citing the tax benefits generated by the required write-down of its fleet when it was spun off from its parent.

Ahead of Barron's report, over-the-counter traded shares of ABX closed at $5.38, up 3 cents for the session.

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