Alaska Air Group ( ALK Quick Quote ALK - Free Report) is a stock that investors may consider adding to their portfolio as it benefits from upbeat air-travel demand despite high fuel costs and the resultant northward movement of airfares.
Against this backdrop, let’s look at the factors that make this stock an attractive pick.
Northward Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 44.3% upward over the past 60 days. For 2022, the consensus mark for earnings has moved 38.1% north in the same time frame. The favorable estimate revisions reflect brokers’ confidence in the stock.
Given the wealth of information at their disposal, it is in the best interest of investors to be guided by brokers' advice and the direction of their estimate revisions. This is because the direction of estimate revisions serves as an important pointer when it comes to ascertaining the stock price.
Positive Earnings Surprise History: Alaska Air has an encouraging earnings surprise history. Earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 18.6%. Upbeat Air- Travel Demand: Improvement in air -travel demand (mainly for leisure travel) bodes well for the airline. On the back of upbeat air-travel demand and favorable pricing, Alaska Air lifted its revenue outlook for the second quarter of 2022.
ALK currently expects total revenues to increase 12-14% from the second-quarter 2019 actuals. The earlier expectation was for a 5-8% increase. Driven by upbeat demand, load factor (% of seats filled with passengers) is anticipated in the 87-88% range (earlier expectation was in the 85-88% band). Revenue passengers are likely to be down in the 9-10% band. The earlier expectation was for a 10-12% decrease.
Moreover, Alaska Air’s expansion and fleet modernization initiatives to cater to the recovery in travel demand are encouraging.
Solid Rank & VGM Score: Alaska Air currently has a Zacks Rank #1 (Strong 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 of 1 or 2, offer the best investment opportunities. Thus, ALK seems an appropriate investment proposition at the moment. Other Stocks to Consider
Investors interested in the Zacks
Transportation sector may also consider Southwest Airlines ( LUV Quick Quote LUV - Free Report) , Star Bulk Carriers ( SBLK Quick Quote SBLK - Free Report) and Forward Air Corporation ( FWRD Quick Quote FWRD - Free Report) , each sporting a Zacks Rank #1.
Continued recovery in air-travel demand bodes well for
Southwest Airlines. Anticipating a steady improvement in bookings, the carrier expects to reap profits in the remaining three quarters of 2022 as well as during the full year. LUV's management predicts operating revenues to increase 12-15% in the second quarter of 2022 from the comparable period’s level in 2019. LUV is seeing strong bookings for spring and summer trips.
The positivity surrounding the Southwest Airlines stock is evident from the Zacks Consensus Estimate for current-year earnings being revised in excess of 100% upward over the past 60 days. LUV has a Growth Style Score of B.
Star Bulk Carriers’ earnings surpassed the Zacks Consensus Estimate in three of the preceding four quarters and missed the mark once, the average surprise being 7.1%.
Shares of Star Bulk have gained more than 29% over the past six months. Improvement in economic activities is aiding the SBLK stock.
Higher volumes owing to a better freight market environment bolster
Forward Air’s top line. Thanks to growth in its operations, FWRD is committed to rewarding its shareholders with dividends and share buybacks. In February, FWRD’s board approved a 14% hike in its quarterly dividend payment to 24 cents per share.
The Zacks Consensus Estimate for Forward Air’s 2022 earnings has been revised 15.6% upward in the past 60 days. FWRD’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 10.2%.