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Will Omicron-Led Woes Mar Alaska Air's (ALK) Q4 Earnings?

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Alaska Air Group (ALK - Free Report) is scheduled to report fourth-quarter 2021 results on Jan 27, before market open.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings has been revised downward by 10% to 18 cents in the past 60 days. Nevertheless, the company’s earnings topped the Zacks Consensus Estimate in all of the last four quarters. Alaska Air has a trailing four-quarter earnings surprise of 8.7%, on average.

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

 

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

Factors to Note

With the continued recovery in air-travel demand and more Americans getting vaccinated, passenger revenues are expected to rise year over year. The Zacks Consensus Estimate for Alaska Air’s fourth-quarter passenger revenues indicates more than a 100% jump from fourth-quarter 2020 reported number.  

Thanks to the Omicron-variant-led spike in coronavirus cases, the company witnessed softness in bookings during the fourth 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 fourth quarter to drop 16-19% from fourth-quarter 2019 levels. Alaska Air expects fourth-quarter revenue passengers to decline 16-19% from 2019 levels.

In response to the lower demand (stemming from the Omicron variant), Alaska Air reduced its capacity. For the fourth quarter, it estimates capacity to decline 13-16% from fourth-quarter 2019 levels.

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 is pegged at $2.32, suggesting an increase from $1.39 reported in fourth-quarter 2020.  

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 -35.69%. 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 #5 (Strong Sell).

Highlights of Q3 Earnings

Alaska Air’s third-quarter 2021 earnings (excluding 6 cents from non-recurring items) of $1.47 per share surpassed the Zacks Consensus Estimate of $1.29. In the year-ago period, the company incurred a loss of $3.23. Operating revenues of $1,953 million outperformed the Zacks Consensus Estimate of $1,932 million. The top line surged more than 100% year over year.

Stocks to Consider

Investors interested in the broader Transportation sector may consider C.H. Robinson Worldwide (CHRW - Free Report) , Werner Enterprises (WERN - Free Report) and Landstar System (LSTR - Free Report) , as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

C.H. Robinson currently has an Earnings ESP of +4.79% and a Zacks Rank #3. C.H. Robinson will report fourth-quarter results on Feb 2.

C.H. Robinson’s fourth-quarter performance is likely to be aided by higher revenues owing to improving freight market conditions in the United States. Shares of CHRW have gained 9.8% in a year’s time.

Werner has an Earnings ESP of +0.35% and is currently a #3 Ranked player. Werner will release fourth-quarter 2021 results on Feb 3.

Werner’s move to expand its final mile capabilities across the Northeast United States and the Midwest through the acquisition of NEHDS Logistics is encouraging. The transaction helps Werner offer its customers expanded transportation solutions for the delivery of big and bulky products.

Landstar System has an Earnings ESP of +1.56% and is Zacks #3 Ranked presently. Landstar System will release fourth-quarter 2021 results on Jan 26.

Landstar’s fourth-quarter results are expected to be aided by an improved freight scenario in the United States. Higher truck rates owing to tight truck capacity should aid December-quarter performance.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.