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Why Is Alaska Air Group (ALK) Down 16.2% Since Its Last Earnings Report?
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A month has gone by since the last earnings report for Alaska Air Group, Inc. (ALK - Free Report) . Shares have lost about 16.2% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is ALK 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 drivers.
First-Quarter Earnings
Alaska Air Group reported first-quarter 2018 earnings (excluding 11 cents from non-recurring items) of 14 cents, surpassing the Zacks Consensus Estimate by 3 cents. However, the bottom line declined 86.7% on a year-over-year basis due to high costs.
Revenues came in at $1,832 million, marginally above the Zacks Consensus Estimate of $1,830.6 million. The top line also improved 5% on a year-over-year basis. Passenger revenues, accounting for a bulk of the top line (86.8%), were also up 5% on a year-over-year basis.
Operating Statistics
Airline traffic, measured in revenue passenger miles, rose 5.9% year over year to 12,403 million in the reported quarter. Capacity or available seat miles expanded 7.5% to 15,480 million. Load factor (percentage of seat occupancy) contracted 120 basis points to 80.1% as capacity expansion outweighed traffic growth.
Total revenue per available seat mile (RASM: a key measure of unit revenues) decreased 2.1% year over year to 11.84 cents in the reported quarter. Yield slipped 0.7% to 13.59 cents.
Operating Expenses & Income
In the quarter under review, total operating expenses were up 14% year over year to $1,803 million. Operating income plunged 82% to $29 million from the prior-year quarter. Fuel price (economic) was $2.14 per gallon, up 20.2%.
Consolidated cost per available seat mile — excluding fuel and special items — nudged up 5.1% to 8.81 cents, mainly owing to a 19% rise in wages and related benefits.
Liquidity
At the end of the reported quarter, the company had $1,528 million in cash and marketable securities compared with $1,621 million at the end of 2017.
Alaska Air Group exited the quarter with long-term debt of $2,062 million compared with $2,262 million at the end of 2017. Adjusted debt-to-capitalization ratio was 53%, flat on a sequential basis.
Q2 & 2018 Forecast
For the second quarter of 2018, the carrier expects cost per available seat mile (CASM), excluding fuel and special items, to increase approximately 4.8% year over year. For 2018, the same is projected to rise 3.5%. Economic fuel cost per gallon is anticipated to be $2.25 per gallon in the second quarter, up approximately 32%. RASM is projected to decline between 2.75% and 3.75% in the same period.
Meanwhile, capacity is anticipated to expand around 8.5% in the second quarter. For the full year, the metric is likely to climb 6.5% whereas effective tax rate in 2018 is estimated to be approximately 25%.
Airline traffic, measured in revenue passenger miles, rose 44.2% year over year to 13,554 million in the reported quarter. Capacity or available seat miles increased 41.1% to 15,612 million. Load factor (percentage of seats filled by passengers) increased 190 basis points to 86.8% owing to traffic growth outpacing capacity expansion.
Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) increased 1.3% year over year to 11.57 cents. While total revenue per available seat mile (RASM) declined 0.4% to 13.46 cents in the reported quarter, yield declined 0.8% to 13.33 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter.
At this time, ALK has a poor Growth Score of F and a grade with the same score on the momentum front. The stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, ALK has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Alaska Air Group (ALK) Down 16.2% Since Its Last Earnings Report?
A month has gone by since the last earnings report for Alaska Air Group, Inc. (ALK - Free Report) . Shares have lost about 16.2% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is ALK 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 drivers.
First-Quarter Earnings
Alaska Air Group reported first-quarter 2018 earnings (excluding 11 cents from non-recurring items) of 14 cents, surpassing the Zacks Consensus Estimate by 3 cents. However, the bottom line declined 86.7% on a year-over-year basis due to high costs.
Revenues came in at $1,832 million, marginally above the Zacks Consensus Estimate of $1,830.6 million. The top line also improved 5% on a year-over-year basis. Passenger revenues, accounting for a bulk of the top line (86.8%), were also up 5% on a year-over-year basis.
Operating Statistics
Airline traffic, measured in revenue passenger miles, rose 5.9% year over year to 12,403 million in the reported quarter. Capacity or available seat miles expanded 7.5% to 15,480 million. Load factor (percentage of seat occupancy) contracted 120 basis points to 80.1% as capacity expansion outweighed traffic growth.
Total revenue per available seat mile (RASM: a key measure of unit revenues) decreased 2.1% year over year to 11.84 cents in the reported quarter. Yield slipped 0.7% to 13.59 cents.
Operating Expenses & Income
In the quarter under review, total operating expenses were up 14% year over year to $1,803 million. Operating income plunged 82% to $29 million from the prior-year quarter. Fuel price (economic) was $2.14 per gallon, up 20.2%.
Consolidated cost per available seat mile — excluding fuel and special items — nudged up 5.1% to 8.81 cents, mainly owing to a 19% rise in wages and related benefits.
Liquidity
At the end of the reported quarter, the company had $1,528 million in cash and marketable securities compared with $1,621 million at the end of 2017.
Alaska Air Group exited the quarter with long-term debt of $2,062 million compared with $2,262 million at the end of 2017. Adjusted debt-to-capitalization ratio was 53%, flat on a sequential basis.
Q2 & 2018 Forecast
For the second quarter of 2018, the carrier expects cost per available seat mile (CASM), excluding fuel and special items, to increase approximately 4.8% year over year. For 2018, the same is projected to rise 3.5%. Economic fuel cost per gallon is anticipated to be $2.25 per gallon in the second quarter, up approximately 32%. RASM is projected to decline between 2.75% and 3.75% in the same period.
Meanwhile, capacity is anticipated to expand around 8.5% in the second quarter. For the full year, the metric is likely to climb 6.5% whereas effective tax rate in 2018 is estimated to be approximately 25%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter.
Alaska Air Group, Inc. Price and Consensus
Alaska Air Group, Inc. Price and Consensus | Alaska Air Group, Inc. Quote
VGM Scores
At this time, ALK has a poor Growth Score of F and a grade with the same score on the momentum front. The stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, ALK has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.