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Here's Why Investors Should Buy Alaska Air (ALK) Stock Now

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Alaska Air Group, Inc. (ALK - Free Report) is currently benefitting from an uptick in air-travel demand.

Solid Rank & VGM Score: Alaska Air currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. Thus, ALK seems an appropriate investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northward Estimate Revisions: Seven estimates for 2022 have moved upward in the past 60 days, indicative of analysts’ confidence in the stock. The Zacks Consensus Estimate for 2022 earnings has moved 38% north in the past 60 days.

Positive Earnings Surprise History: Alaska Air has a stellar earnings surprise history. Earnings outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average being 18.5%.

Strong Prospects: The Zacks Consensus Estimate for 2022 earnings is pegged at $3.92, which indicates growth of 292% from the year-ago reported figure. Moreover, earnings are expected to estimate 65.6% growth in 2023.  

Driving Factors: Buoyed by the uptick in air-travel demand from the 2020 levels, consolidated traffic (measured in revenue passenger miles) soared 96.3% year over year to 10.59 billion in the March quarter. To cater to this increased demand, capacity (measured in average seat miles) expanded 32.6% to 13.78 billion. Consolidated load factor (percentage of seats filled by passengers) increased 24.9 percentage points to 76.8% in the first quarter of 2022.

Improvement in air-travel demand bodes well for ALK. Following a softness in bookings in January due to Omicron-induced woes, the carrier has been seeing demand trending above the 2019 levels. It is seeing a continuous improvement in both leisure (100% recovery from the 2019 level) and business travel (70% recovery) demand. For the second quarter, total revenues are expected to increase 5-8% on capacity.  This is likely to result in double-digit yields, improved unit revenues and a healthy pre-tax margin in the quarter. Alaska Air expects to reap profits from the second quarter onward through 2022. For the full year, the airline expects pre-tax margin of 6-9%.

Other Stocks to Consider

Investors interested in the Zacks Transportation sector can also consider stocks like Ryder System, Inc. (R - Free Report) , C.H. Robinson Worldwide, Inc. (CHRW - Free Report) and GATX Corporation (GATX - Free Report) .

Ryder has a trailing four-quarter surprise of 48.2%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters. R is benefiting from improving economic and freight conditions in the United States. Revenues in all segments grew (on higher rental revenues, new business and favorable pricing) in first-quarter 2022.

R currently sports a Zacks Rank of 1.

The expected long-term earnings per share (EPS) (three-to-five years) growth rate for C.H. Robinson is pegged at 9%. Improving freight market conditions are aiding CHRW. In first-quarter 2022, the top line improved 41.8% owing to favorable truckload pricing for customers and handsome profits in ocean freight.

Driven by the positives, the stock has rallied 8.6% in the past year.  CHRW currently sports a Zacks Rank of 1.

GATX has a trailing-four quarter surprise of 40.1%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters. The gradual improvement in the North American railcar leasing market is a huge positive for GATX.

Driven by the upsides, the stock has risen 8.9% in the past year.  GATX currently sports a Zacks Rank #1.
 

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