A month has gone by since the last earnings report for Alaska Air Group (
ALK Quick Quote ALK - Free Report) . Shares have added about 17.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alaska Air due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Alaska Air's Q3 Loss Wider Than Expected
Alaska Air, incurred a loss of $3.23 per share (excluding 26 cents from non-recurring items) in the third quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $2.86. However, in the year-ago quarter, the company delivered earnings of $2.63 when air-travel demand was strong. The September-quarter’s underperformance can be attributed to the advent of the coronavirus, which dramatically changed the scenario for the airlines.
Revenues at Alaska Air came in at $701 million, surpassing the Zacks Consensus Estimate of $680.3 million. The top line, however, declined 70.7% year over year. Passenger revenues — contributing 81.6% to the top line — were down 74% on a year-over-year basis due to weak travel demand Other Details
Consolidated traffic, measured in revenue passenger miles, fell 74.6% year over year in the reported quarter. Consolidated capacity (measured in available seat miles) dropped 55.1%. Load factor (percentage of seats occupied by passengers) deteriorated 37.3 points to 48.5% as traffic plunged more than the amount of capacity contraction.
Total revenue per available seat mile (RASM: a key measure of unit revenues) slumped 34.8% year over year to 8.9 cents in the reported quarter on a consolidated basis. Meanwhile, yield inched up 1.9% to 14.99 cents.
In the third quarter, total operating expenses (on a reported basis) were down 35% year over year to $1,272 million. Consolidated fuel price (economic) was $1.32 per gallon, down 38% year over year. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed were down 57.4%. Consolidated cost per available seat mile excluding fuel and special items surged more than 66% to 14 cents, mainly due to the capacity cuts. Liquidity
At the end of the third quarter, the company had $3,759 million in cash and marketable securities compared with $1,521 million at the end of 2019.
The company exited the third quarter with long-term debt of $2,672 million compared with $1,264 million at the end of 2019. Inclusive of operating leases, debt-to-capitalization ratio was 59% compared with 41% at the end of December 2019.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -35.12% due to these changes.
Currently, Alaska Air has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Alaska Air has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.