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What's in Store for Alaska Air (ALK) Stock in Q4 Earnings?

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Alaska Air Group, Inc. (ALK - Free Report) ) is scheduled to release fourth-quarter 2020 results on Jan 26, before market open.

The Zacks Consensus Estimate for fourth-quarter bottom line has widened from a loss of $2.33 per share to a loss of $2.85 per share in the past 60 days. The company has an average record with respect to earnings per share, having outpaced the Zacks Consensus Estimate in two of the last four quarters (missing the same in the remaining two). It has a trailing four-quarter earnings surprise of 5.4%, on average.

Against this backdrop, let’s discuss the factors that might have impacted the company’s December-quarter performance.

Alaska Air Group, Inc. Price and EPS Surprise

 

Alaska Air Group, Inc. Price and EPS Surprise

Alaska Air Group, Inc. price-eps-surprise | Alaska Air Group, Inc. Quote

 

Akin to the third quarter, Alaska Air’s fourth-quarter performance is likely to have been dented by coronavirus-induced weak passenger revenues due to low air-travel demand. The Zacks Consensus Estimate for total passenger revenues indicates a 65.3% decline from the number reported in the year-ago quarter.

In order to mitigate the low-demand scenario, the carrier is trimming its capacity. The Zacks Consensus Estimate for available seat miles (a measure of capacity) indicates a 39.9% decline from the number reported in the year-ago quarter. The Zacks Consensus Estimate for traffic (measured in revenue passenger miles) suggests a drop of 62.7% from the prior-year quarter’s reported figure.

With traffic declining faster than capacity cuts, load factor (% of seats filled by passengers) is likely to have tanked in the fourth quarter. The Zacks Consensus Estimate for Alaska Air’s fourth-quarter 2020 passenger load factor stands at a dismal 47.8%, a significant decline from 84% reported in fourth-quarter 2019.

However, lower fuel prices are expected to have boosted Alaska Air’s bottom line. Notably, the Zacks Consensus Estimate for economic fuel price per gallon suggests a 34.4% drop from the figure reported in the December quarter of 2019.

What the Zacks Model Unveils

Our proven model does not conclusively predict a bottom-line outperformance for Alaska Air this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. But that is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Alaska Air has an Earnings ESP of -0.83%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Alaska Air carries a Zacks Rank #4 (Sell), currently.

Highlights of Q3

Alaska Air, incurred a loss of $3.23 per share (excluding 26 cents from non-recurring items) in the third quarter of 2020. The figure was wider than the Zacks Consensus Estimate of a loss of $2.86. The September-quarter’s underperformance was caused by the coronavirus outbreak, which dramatically changed the scenario for airlines. The company generated revenues of $701 million, which surpassed the Zacks Consensus Estimate of $680.3 million. However, the top line 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.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Canadian Pacific Railway Limited (CP - Free Report) , CSX Corporation (CSX - Free Report) and Landstar System, Inc. (LSTR - Free Report) as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

Canadian Pacific has an Earnings ESP of +0.12% and is Zacks #3 Ranked, presently. The company will release fourth-quarter 2020 results on Jan 27.

CSX has an Earnings ESP of +0.47% and a Zacks Rank of 3 at present. The company will release fourth-quarter 2020 results on Jan 21.

Landstar System has an Earnings ESP of +2.99% and is currently a #3 Ranked player. The company will release fourth-quarter 2020 results on Jan 27.

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