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Alaska Air Down 14% YTD, Plane Theft & Crash Raise Concerns
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Shares of Alaska Air Group, Inc. (ALK - Free Report) have been performing miserably this year, losing 13.9% of their value on a year-to-date basis. This underperformance can be attributed to multiple headwinds like high costs and declining unit revenues.
YTD Price Performance
Richard Russell Incident Adds to Concerns
Apart from the above-mentioned woes, the bizarre incident on Aug 10 at Alaska Air’s subsidiary — Horizon Air — involving a ground-services worker (Richard Russell) has raised questions about security not only at this Seattle, WA-based carrier but the entire aviation space.
According to media reports, Russel entered a Bombardier Q400 turboprop plane at the maintenance area of the Seattle-Tacoma International Airport. Russell, who was employed at Horizon Air for more than three years, took control of the airplane and flew for quite some time (often erratically) before his death following the crash on Ketron Island in Puget Sound.
The incident, which ended tragically, has naturally raised questions as to how a non-pilot (who has been described as suicidal by authorities) could start, control and fly a complex modern aircraft. The plane theft has also raised questions about security and is being probed by various agencies. The incident invited attention from across the globe and is likely to hurt the Alaska Air stock further.
Other Headwinds
The bizarre incident apart, high costs have been putting pressure on the company’s bottom line for quite some time and the second quarter of 2018 was no exception. In the second quarter, results of which were announced last month, total operating expenses jumped 17% mainly due to high labor and fuel costs. High costs resulted in the bottom line contracting year over year.
What is worse is that high costs are expected to hurt the bottom line in the third quarter of 2018 as well. For the third quarter, the carrier expects cost per available seat mile (CASM), excluding fuel and special items, to grow roughly 4.9% year over year. Economic fuel cost per gallon is anticipated to be $2.30 per gallon in the quarter, up approximately 27.8%.
The company has also been struggling on the unit revenue front. In the second quarter, total revenue per available seat mile (RASM: a key measure of unit revenues) decreased 4.8% year over year. RASM is projected to decline up to 3% in the third quarter.
In fact, the negativity surrounding around the stock can be gauged from the fact that the Zacks Consensus Estimate for current-quarter and year earnings have been revised downward to the tune of 20.8% and 13%, respectively, over the last 30 days.
The company’s unimpressive Momentum Score of F further highlights its short-term unattractiveness. The bearish Zacks Rank #5 (Strong Sell) carried by Alaska Air is reflective of the headwinds.
Shares of SkyWest, GATX and Trinity have surged more than 60%, 33% and 31%, respectively, in a year.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Alaska Air Down 14% YTD, Plane Theft & Crash Raise Concerns
Shares of Alaska Air Group, Inc. (ALK - Free Report) have been performing miserably this year, losing 13.9% of their value on a year-to-date basis. This underperformance can be attributed to multiple headwinds like high costs and declining unit revenues.
YTD Price Performance
Richard Russell Incident Adds to Concerns
Apart from the above-mentioned woes, the bizarre incident on Aug 10 at Alaska Air’s subsidiary — Horizon Air — involving a ground-services worker (Richard Russell) has raised questions about security not only at this Seattle, WA-based carrier but the entire aviation space.
According to media reports, Russel entered a Bombardier Q400 turboprop plane at the maintenance area of the Seattle-Tacoma International Airport. Russell, who was employed at Horizon Air for more than three years, took control of the airplane and flew for quite some time (often erratically) before his death following the crash on Ketron Island in Puget Sound.
The incident, which ended tragically, has naturally raised questions as to how a non-pilot (who has been described as suicidal by authorities) could start, control and fly a complex modern aircraft. The plane theft has also raised questions about security and is being probed by various agencies. The incident invited attention from across the globe and is likely to hurt the Alaska Air stock further.
Other Headwinds
The bizarre incident apart, high costs have been putting pressure on the company’s bottom line for quite some time and the second quarter of 2018 was no exception. In the second quarter, results of which were announced last month, total operating expenses jumped 17% mainly due to high labor and fuel costs. High costs resulted in the bottom line contracting year over year.
What is worse is that high costs are expected to hurt the bottom line in the third quarter of 2018 as well. For the third quarter, the carrier expects cost per available seat mile (CASM), excluding fuel and special items, to grow roughly 4.9% year over year. Economic fuel cost per gallon is anticipated to be $2.30 per gallon in the quarter, up approximately 27.8%.
The company has also been struggling on the unit revenue front. In the second quarter, total revenue per available seat mile (RASM: a key measure of unit revenues) decreased 4.8% year over year. RASM is projected to decline up to 3% in the third quarter.
In fact, the negativity surrounding around the stock can be gauged from the fact that the Zacks Consensus Estimate for current-quarter and year earnings have been revised downward to the tune of 20.8% and 13%, respectively, over the last 30 days.
The company’s unimpressive Momentum Score of F further highlights its short-term unattractiveness. The bearish Zacks Rank #5 (Strong Sell) carried by Alaska Air is reflective of the headwinds.
Stocks to Consider
Some better-ranked stocks in the broader Transportation sector are SkyWest, Inc. (SKYW - Free Report) , GATX Corporation (GATX - Free Report) and Trinity Industries, Inc. (TRN - Free Report) . While SkyWest and Trinity sport a Zacks Rank #1 (Strong Buy), GATX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of SkyWest, GATX and Trinity have surged more than 60%, 33% and 31%, respectively, in a year.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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