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Alaska Air Group (ALK) Q3 Earnings Top Estimates, Fall Y/Y

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Alaska Air Group, Inc. (ALK - Free Report) reported third-quarter 2018 earnings per share (excluding 16 cents from non-recurring items) of $1.91 per share, surpassing the Zacks Consensus Estimate of $1.80. However, quarterly earnings declined on a year-over-year basis mainly due to high fuel costs.

Revenues came in at $2,212 million, which were above the Zacks Consensus Estimate of $2,203.9 million. Moreover, revenues increased 5% on a year over year basis. Passenger revenues, accounting for a bulk of the top line (92.4%), were up 4% on a year-over-year basis.

Operating Statistics

Airline traffic, measured in revenue passenger miles, rose 4.2% year over year in the reported quarter. Capacity or available seat miles expanded 4.8%. Load factor (percentage of seats occupied by passengers) contracted 50 basis points to 84.9% as capacity expansion outweighed traffic growth in the reported quarter.

Total revenue per available seat mile (RASM: a key measure of unit revenues) decreased 0.1% year over year to 13.05 cents in the reported quarter. Meanwhile, yield increased 0.1% to 14.2 cents.

Alaska Air Group, Inc. Price, Consensus and EPS Surprise

 

Alaska Air Group, Inc. Price, Consensus and EPS Surprise | Alaska Air Group, Inc. Quote

Operating Expenses & Income

In the quarter under review, total operating expenses were up 14% year over year to $1,915 million. Operating income plunged 30% to $290 million from the prior-year quarter. Fuel price (economic) was $2.33 per gallon, up 29.4%.

Consolidated cost per available seat mile — excluding fuel and special items — nudged up 1.9% to 8.15 cents, mainly owing to a 15% rise in wages and related benefits.

Liquidity & Buybacks

At the end of the reported quarter, this Zacks Rank #3 (Hold) company had $1,397 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 $1,684 million compared with $2,262 million at the end of 2017. Adjusted debt-to-capitalization ratio was 49%. The ratio was 53% at the end of 2017. Moreover, the carrier repurchased 582,942 shares for approximately $37 million in the first nine months of 2018.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q4 & 2018 Forecast

For the fourth quarter of 2018, the carrier expects cost per available seat mile (CASM), excluding fuel and special items, to grow roughly 3.6% year over year. The metric is anticipated to lie between 8.97 cents and 9.01 cents in the final quarter of 2018. For 2018, the same is projected to lie between 8.50 cents and 8.52 cents, up 3.2%. Economic fuel cost per gallon is anticipated to be $2.37 per gallon in the fourth quarter, up approximately 18.5%. RASM is projected to decline between 1.5% and 3.5% in the October-December period.

Meanwhile, capacity is anticipated to expand around 1.4% in the fourth quarter. For the full year, the metric is likely to climb 5.3% whereas effective tax rate in 2018 is estimated to be approximately 25%.

Upcoming Releases

Investors interested in the broader Transportation Sector are awaiting third-quarter 2018 earnings reports from key players, namely Genesee & Wyoming Inc. , Atlas Air Worldwide Holdings, Inc. and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) . Genesee & Wyoming and C.H. Robinson will release results on Oct 30. Atlas Air Worldwide will announce the same on Nov 1.

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