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Bear of the Day: Alaska Air Group (ALK)

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Alaska Air Group, Inc. (ALK - Free Report) is caught in the coronavirus cross hairs. This Zacks Rank #5 (Strong Sell) is looking forward to a recovery in travel in 2021.

Alaska Air Group operates Alaska Airlines and Horizon Air to more than 115 destinations across the United States and North America. It has hubs in Seattle, San Francisco, Los Angeles, Portland, Oregon and Anchorage.

A Miss in the Third Quarter

On Oct 22, Alaska Air reported its third quarter results and missed on the Zacks Consensus by 12.9%.

Earnings were a loss of $3.23 versus the consensus of a loss of $2.86.

It was the second earnings miss in a row but both quarters were impacted by the coronavirus pandemic.

Alaska reduced its cash burn rate in the third quarter to $4 million a day from $5 million a day in the second quarter as it saw improvement in the business each month of the quarter.

To soothe nervous fliers, it also extended its blocking of the middle seat on its aircraft through Jan 6, 2021.

Cash on Hand

As of Oct 21, 2020, Alaska had $3.7 billion in cash and marketable securities and $5.5 billion in total liquidity.

2020 and 2021 Earnings Estimates Cut Again

The analysts have gotten more bearish on Alaska in the last month.

5 estimates for 2020 have been cut in the last 30 days, with one in the last week after the earnings report.

The Zacks Consensus has fallen to a loss of $9.04 from a loss of $8.58 just a month ago. That’s a loss of 240% as Alaska Air made $6.42 in 2019.

The analysts are also more bearish on 2021.

2 estimates have been cut in the last week with the Zacks Consensus falling to $1.03 from $2.37 just 30 days ago.

Shares Still Down in 2020

While the shares got a bump off the March coronavirus lows, they have stagnated the last few months and are still down 43% year-to-date.

It’s no better anywhere else in the industry.

There are no Zacks #1 (Strong Buy) or #2 (Buy) airline stocks. American Airlines (AAL - Free Report) is a Zacks Rank #3 (Hold). But Delta (DAL - Free Report) joins Alaska in being a Zacks #5 (Strong Sell).

Investors may want to stay on the sidelines until travel begins to pick up further.

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