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Will Delta-Variant-Led Woes Mar Alaska Air's (ALK) Q3 Earnings?

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Alaska Air Group (ALK - Free Report) is scheduled to release third-quarter 2021 results on Oct 21, before market open.

The Zacks Consensus Estimate for the company’s third-quarter earnings has been revised downward by 25.2% in the past 60 days. However, the company has an impressive earnings history having outperformed the Zacks Consensus Estimate in three of the past four quarters and missing once.

Let’s see how things are shaping up for Alaska Air this earnings season:

Factors to Note

With continued recovery in air-travel demand, passenger revenues are expected to reflect sequential improvement. The Zacks Consensus Estimate for Alaska Air’s passenger revenues in the third quarter indicates a 28.8% jump from the second-quarter reported number. For the third quarter, Alaska Air expects to generate positive pretax margin.

However, with the Delta-variant-led spike in coronavirus cases, the company witnessed softness in bookings during the third quarter. This is expected to have partly dented revenues in the soon-to-be-reported quarter.

As air-travel demand remains below the pre-pandemic levels, the carrier anticipates total revenues for the third quarter to drop 19-21% from the comparable period in 2019. It expects third-quarter revenue passengers to decrease 21-23% from the 2019 level.

In response to the lower demand, Alaska Air has reduced its capacity. For the third quarter, it estimates capacity to decline 17-18% approximately from the third-quarter 2019 level.

Rising fuel costs, thanks to a spike in oil prices, might have hurt the airline’s bottom line. The Zacks Consensus Estimate for economic fuel cost per gallon stands at $2, higher than $1.9 reported in the second quarter. Alaska Air estimates the same to be $1.98 for the third quarter.

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

Earnings Whispers

The proven Zacks model does not conclusively predict an earnings beat 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 an earnings beat. However, this is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Alaska Air has an Earnings ESP of +3.17% as the Most Accurate Estimate is pegged at $1.07, while the Zacks Consensus Estimate is poised at $1.04. 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).

Highlights of Q2 Earnings

In the last-reported quarter, Alaska Air delivered an earnings surprise of 3.23% with narrower-than-expected loss. Despite falling short of the Zacks Consensus Estimate, operating revenues skyrocketed 262.71% year over year with significant rise in passenger revenues, owing to improvement in air-travel demand.

Stocks to Consider

Investors interested in the broader Transportation sector may consider C.H. Robinson Worldwide (CHRW - Free Report) , Knight-Swift Transportation Holdings (KNX - Free Report) and Ryder System (R - Free Report) , as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

C.H. Robinson has an Earnings ESP of +1.06% and a Zacks Rank #2. The company will report third-quarter 2021 results on Oct 26.

Knight-Swift has an Earnings ESP of +1.33% and a Zacks Rank #3. The company is scheduled to report third-quarter 2021 earnings numbers on Oct 20.

Ryder has an Earnings ESP of +4.73% and a Zacks Rank #2. The company will release third-quarter 2021 financial numbers on Oct 27.