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Here's Why You Should Hold on to Alaska Air (ALK) Stock Now
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Alaska Air Group's (ALK - Free Report) shareholder-friendly approach and upbeat air travel demand bode well. However, high costs are hurting the bottom line.
Factors Favoring ALK
Boosted by strong air travel demand and favorable pricing, Alaska Air's revenues surged 8% year over year in 2023, with passenger revenues also marking an 8% increase for the year.
Alaska Air's efforts to modernize its fleet bode well. The impending $1.9 billion acquisition of Hawaiian Holdings (HA - Free Report) will bolster its fleet size further if the deal to buy HA materializes.
Moreover, in the first quarter of 2023, ALK resumed its share repurchase program. The company repurchased 3.5 million shares for $145 million in 2023. We remind investors that the restrictions under the CARES Act prohibited airlines from paying dividends or buying back shares till Sep 30, 2022.
Key Risks
Rising fuel costs, spurred by a rise in oil prices, adversely impacted Alaska Air's bottom line in the fourth quarter of 2023. The economic fuel price per gallon rose to $3.42, up by 4.9% from the third quarter of 2023, posing challenges for the airline. For the full-year 2023, operating costs at ALK rose 5% year over year, driven by a rise in labor expenses, with wages and benefits escalating by 15% compared to 2022.
On Jan 5, 2024, Alaska Airlines' Boeing 737 MAX 9 flight to Ontario experienced a panel and window blowout, prompting an emergency landing. The Federal Aviation Administration (“FAA”) ordered a temporary grounding of 171 jets, affecting ALK's entire Max 9 fleet and causing flight disruptions. Despite the Jan 24 lift, FAA restrictions on Boeing's production affect ALK, which has 65 Max 9 jets in its fleet.
Zacks Rank
ALK currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Airline industry include Skywest ((SKYW - Free Report) ) and American Airlines ((AAL - Free Report) ).
Skywest, which currently sports a Zacks Rank #1 (Strong Buy), experiences major tailwinds through its active fleet upgrade efforts and shareholder-friendly approaches. You can see the complete list of today’s Zacks Rank #1 stocks here.
SKYW has an impressive earnings surprise history, beating the Zacks Consensus Estimate in each of the past four quarters. The average beat is 128.02%. SKYW shares have surged more than 100% in a year.
American Airlines is experiencing positive momentum in air travel demand, particularly on the domestic front. The airline's notable efforts to reduce debt are commendable, targeting a $15 billion reduction by the end of 2025.
The Zacks Consensus Estimate for 2024 earnings has been revised 34.2% upward over the past 60 days. AAL has a stellar earnings surprise history, beating the Zacks Consensus Estimate in each of the past four quarters. The average beat is 119%. AAL currently carries a Zacks Rank #2 (Buy).
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Here's Why You Should Hold on to Alaska Air (ALK) Stock Now
Alaska Air Group's (ALK - Free Report) shareholder-friendly approach and upbeat air travel demand bode well. However, high costs are hurting the bottom line.
Factors Favoring ALK
Boosted by strong air travel demand and favorable pricing, Alaska Air's revenues surged 8% year over year in 2023, with passenger revenues also marking an 8% increase for the year.
Alaska Air's efforts to modernize its fleet bode well. The impending $1.9 billion acquisition of Hawaiian Holdings (HA - Free Report) will bolster its fleet size further if the deal to buy HA materializes.
Moreover, in the first quarter of 2023, ALK resumed its share repurchase program. The company repurchased 3.5 million shares for $145 million in 2023. We remind investors that the restrictions under the CARES Act prohibited airlines from paying dividends or buying back shares till Sep 30, 2022.
Key Risks
Rising fuel costs, spurred by a rise in oil prices, adversely impacted Alaska Air's bottom line in the fourth quarter of 2023. The economic fuel price per gallon rose to $3.42, up by 4.9% from the third quarter of 2023, posing challenges for the airline. For the full-year 2023, operating costs at ALK rose 5% year over year, driven by a rise in labor expenses, with wages and benefits escalating by 15% compared to 2022.
On Jan 5, 2024, Alaska Airlines' Boeing 737 MAX 9 flight to Ontario experienced a panel and window blowout, prompting an emergency landing. The Federal Aviation Administration (“FAA”) ordered a temporary grounding of 171 jets, affecting ALK's entire Max 9 fleet and causing flight disruptions. Despite the Jan 24 lift, FAA restrictions on Boeing's production affect ALK, which has 65 Max 9 jets in its fleet.
Zacks Rank
ALK currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Airline industry include Skywest ((SKYW - Free Report) ) and American Airlines ((AAL - Free Report) ).
Skywest, which currently sports a Zacks Rank #1 (Strong Buy), experiences major tailwinds through its active fleet upgrade efforts and shareholder-friendly approaches. You can see the complete list of today’s Zacks Rank #1 stocks here.
SKYW has an impressive earnings surprise history, beating the Zacks Consensus Estimate in each of the past four quarters. The average beat is 128.02%. SKYW shares have surged more than 100% in a year.
American Airlines is experiencing positive momentum in air travel demand, particularly on the domestic front. The airline's notable efforts to reduce debt are commendable, targeting a $15 billion reduction by the end of 2025.
The Zacks Consensus Estimate for 2024 earnings has been revised 34.2% upward over the past 60 days. AAL has a stellar earnings surprise history, beating the Zacks Consensus Estimate in each of the past four quarters. The average beat is 119%. AAL currently carries a Zacks Rank #2 (Buy).