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Why Is Alaska Air Group (ALK) Down 3.7% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Alaska Air Group, Inc. (ALK - Free Report) . Shares have lost about 3.7% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Fourth-Quarter Earnings

Alaska Air Group, Inc.'s earnings of $1.56 per share were $0.15 above the Zacks Consensus Estimate. Moreover, the bottom line expanded 6.85% on a year-over-year basis.

Revenues came in at $1.52 billion, beating the Zacks Consensus Estimate of $1.43 billion. The top line grew 11% on a year-over-year basis. Passenger revenues, which improved 9% on a year-over-year basis, accounted for bulk of the top line.

Operating Statistics

Airline traffic, measured in revenue passenger miles, rose 13.1% year over year to 9,640 million in the final quarter of 2016. Capacity or available seat miles increased 10.3% to 11,407 million. Load factor (percentage of seats filled by passengers) climbed 200 basis points to 84.5%, owing to traffic growth outpaced capacity expansion.

Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 0.9% year over year. While total revenue per available seat mile (RASM) climbed 0.3% , yield declined 3.3%.

Operating Expenses & Income

In the quarter under review, total operating expenses (on a reported basis) rose 14% year over year to $1,283 million. Operating income declined 5% to $241 million from the prior-year quarter. Fuel price (economic) was $1.68 per gallon, up 3.7%. Consolidated unit cost or cost per available seat mile– excluding fuel and special items – decreased marginally.

Liquidity

At the end of 2016, the  company had $1,580 million in cash and marketable securities compared with $1,328 million at the end of 2015. The company exited the year with long-term debt of $2,637 million compared with $569 million at the end of 2015. At the end of 2016, adjusted debt-to-capitalization ratio was 59% compared with 27% at 2015-end.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been four downward revisions for the current quarter.

VGM Scores

At this time, Alaska Air Group's stock has an average Growth Score of 'C', however its Momentum is doing a lot better with an 'A'. Following the exact same course, the stock was allocated also a grade of 'A' on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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