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Alaska Air Shares Gain 13.16% in Tuesday's Trading: Here's Why
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Shares of Alaska Air Group, Inc. (ALK - Free Report) performed exceedingly well on the bourse on Dec. 10, 2024, closing the trading session at $61.29 per share, up 13.16% from the previous day's closing. The upside was owing to the bullish financial outlook (which was boosted by rosy holiday travel demand), a share buyback announcement and upcoming growth plans, as revealed by the company at its Investor Day conference.
Let’s delve deeper.
ALK’s Bullish Outlook
ALK raises its fourth-quarter 2024 adjusted earnings per share guidance (EPS) to the range of 40-50 cents from the previously guided range of 20-40 cents. Solid revenue performance and lower non-operating expenses have led to the encouraging EPS forecast. The Zacks Consensus Estimate for fourth-quarter EPS is pegged at 36 cents.
ALK witnessed solid close-in bookings during October and November, with November revenues performing better than expected despite Thanksgiving travel return patterns shifting to early December. December revenues are also outperforming its prior expectations owing to upbeat holiday demand.
Non-operating expenses are now expected to be $45 million, down from the prior view of $50 million. As ALK paid down its additional debt in the quarter, the overall interest costs were lowered.
ALK expects fourth-quarter capacity (measured in available seat miles) to increase 1.5% year over year compared with the prior guided range of 1.5-2.5% on a year-over-year basis. Capacity is slightly lower than its previous expectations owing to challenging weather in the quarter.
Revenue per available seat mile (RASM: a key measure of unit revenues) is now expected to increase mid-to-high single digits compared with the prior view of mid-single digits.
Consolidated operating costs per available seat mile (excluding fuel and special items) are expected to increase in the low double digits compared with the prior view of high single digits. CASMex is slightly higher owing to higher profit-sharing accruals on improved earnings.
Economic fuel cost per gallon is still anticipated to be in the range of $2.55-$2.65.
Backed by the bullish fourth-quarter improvement, this Zacks Rank #3 (Hold) stock raised its full-year adjusted EPS to the range of $4.25-$4.50 from the prior guidance of $3.50-$4.50. The Zacks Consensus estimate of $4.26 lies within the updated guidance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ALK’s Share Buyback Plans
On a shareholder-friendly note, ALK’s board of directors (on Dec. 9, 2024) approved a share repurchase program authorizing the company to buy back shares up to $1 billion of its common stock. Under the share repurchase program, ALK aims to repurchase shares through open market stock purchases, negotiated transactions, or other means in accordance with applicable federal securities laws. The program will start after the completion of the existing repurchase program.
We would like to remind investors that after being restricted under the CARES Act (which prohibited airlines from paying dividends or buying back shares till Sept. 30, 2022), ALK’s management resumed share buybacks in 2023. During 2023, ALK repurchased nearly 3.5 million shares for $145 million. The airline has remained active on the buyback front in the first three quarters of 2024 as well.
Optimistic 2025 Guidance for ALK
Given the aforementioned encouraging outlook for fourth-quarter and full-year 2024, share buyback programs and growth plans, ALK is hopeful that its synergy targets and commercial initiatives will allow for no dilution to adjusted pretax margin in 2025 compared with 2024.
Further, it expects EPS to be around $5.75 for 2025, which marks an improvement of 30% from the midpoint of the full-year 2024 updated guided range of $4.25-$4.50. The Zacks Consensus Estimate for 2025 EPS is pegged at $5.35 per share.
ALK is also hopeful of generating positive free cash flow while investing in the fleet, balance sheet and shareholder returns. Capital expenditures are expected to be between $1.4 billion and $1.5 billion in 2025. ALK anticipates to buyback shares worth $250 million in 2025.
Capacity is anticipated to increase 2% to 3%.
Upcoming Strategic Growth Plans Post Hawaiian Buy
ALK announced its upcoming growth plans in its first presentation after completing the Hawaiian Holdings acquisition on Sept. 18, 2024.
Alaska Air Group introduces “Alaska Accelerate,” its three-year strategic plan and vision for the combined company. Through this plan, Alaska Air Group aims to strengthen commercial performance, achieve medium-term financial targets, and unlock significant value creation in the future.
Alaska Air’s financial targets for 2027 include $1 billion in incremental profit, EPS of at least $10, double-digit pretax profit margins in the range of 11-13%, no margin dilution in the first year following the merger, synergy estimates doubled to at least $500 million.
ALK is also expanding globally with the launch of a new global gateway from Seattle to Tokyo Narita in Japan and Seoul Incheon in South Korea and expanding to at least 12 international widebody destinations by 2030. Daily nonstop Seattle-Tokyo Narita service starts in May 2025, offering guests an enticing nonstop option between the Pacific Northwest and Japan. Flights can be booked now at alaskaair.com and hawaiianairlines.com. Non-stop Seattle-Seoul Incheon service is slated to start in October 2025, with tickets available for purchase early next year.
The launch of a premium credit card with lucrative offers for global travelers to explore the expanding network should act as a tailwind for the airline company.
With contributions coming from network, product, loyalty and cargo, we expect ALK to generate the majority of the expected profit growth over the next three years, thereby unlocking an additional $800 million in revenues.
Bullish Q4 View of Other Airline Companies
In addition to ALK, Southwest Airlines Co. (LUV - Free Report) ), American Airlines (AAL - Free Report) and JetBlue Airways Corporation (JBLU - Free Report) have also provided encouraging fourth-quarter 2024 guidance backed by upbeat holiday travel demand.
LUV now anticipates its fourth-quarter revenue per available seat mile (RASM or unit revenues) to increase in the range of 5.5%-7% on a year-over-year basis. This marks an improvement from the previous forecast of growth of 3.5% to 5.5%. The upside was owing to improving industry demand trends, and the company's revenue management techniques paid off.
AAL lifted its fourth-quarter 2024 adjusted earnings per share guidance owing to favorable pricing and revenue environment. JBLU anticipates its fourth-quarter revenues to decline in the range of 2-5% on a year-over-year basis. This marks an improvement from the previous guidance of a 3%-7% decline. For 2024, total revenues are forecasted to tumble in the range of 3.5-4.5% (prior view: down 4-5%).
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Alaska Air Shares Gain 13.16% in Tuesday's Trading: Here's Why
Shares of Alaska Air Group, Inc. (ALK - Free Report) performed exceedingly well on the bourse on Dec. 10, 2024, closing the trading session at $61.29 per share, up 13.16% from the previous day's closing. The upside was owing to the bullish financial outlook (which was boosted by rosy holiday travel demand), a share buyback announcement and upcoming growth plans, as revealed by the company at its Investor Day conference.
Let’s delve deeper.
ALK’s Bullish Outlook
ALK raises its fourth-quarter 2024 adjusted earnings per share guidance (EPS) to the range of 40-50 cents from the previously guided range of 20-40 cents. Solid revenue performance and lower non-operating expenses have led to the encouraging EPS forecast. The Zacks Consensus Estimate for fourth-quarter EPS is pegged at 36 cents.
ALK witnessed solid close-in bookings during October and November, with November revenues performing better than expected despite Thanksgiving travel return patterns shifting to early December. December revenues are also outperforming its prior expectations owing to upbeat holiday demand.
Non-operating expenses are now expected to be $45 million, down from the prior view of $50 million. As ALK paid down its additional debt in the quarter, the overall interest costs were lowered.
ALK expects fourth-quarter capacity (measured in available seat miles) to increase 1.5% year over year compared with the prior guided range of 1.5-2.5% on a year-over-year basis. Capacity is slightly lower than its previous expectations owing to challenging weather in the quarter.
Revenue per available seat mile (RASM: a key measure of unit revenues) is now expected to increase mid-to-high single digits compared with the prior view of mid-single digits.
Consolidated operating costs per available seat mile (excluding fuel and special items) are expected to increase in the low double digits compared with the prior view of high single digits. CASMex is slightly higher owing to higher profit-sharing accruals on improved earnings.
Economic fuel cost per gallon is still anticipated to be in the range of $2.55-$2.65.
Backed by the bullish fourth-quarter improvement, this Zacks Rank #3 (Hold) stock raised its full-year adjusted EPS to the range of $4.25-$4.50 from the prior guidance of $3.50-$4.50. The Zacks Consensus estimate of $4.26 lies within the updated guidance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ALK’s Share Buyback Plans
On a shareholder-friendly note, ALK’s board of directors (on Dec. 9, 2024) approved a share repurchase program authorizing the company to buy back shares up to $1 billion of its common stock. Under the share repurchase program, ALK aims to repurchase shares through open market stock purchases, negotiated transactions, or other means in accordance with applicable federal securities laws. The program will start after the completion of the existing repurchase program.
We would like to remind investors that after being restricted under the CARES Act (which prohibited airlines from paying dividends or buying back shares till Sept. 30, 2022), ALK’s management resumed share buybacks in 2023. During 2023, ALK repurchased nearly 3.5 million shares for $145 million. The airline has remained active on the buyback front in the first three quarters of 2024 as well.
Optimistic 2025 Guidance for ALK
Given the aforementioned encouraging outlook for fourth-quarter and full-year 2024, share buyback programs and growth plans, ALK is hopeful that its synergy targets and commercial initiatives will allow for no dilution to adjusted pretax margin in 2025 compared with 2024.
Further, it expects EPS to be around $5.75 for 2025, which marks an improvement of 30% from the midpoint of the full-year 2024 updated guided range of $4.25-$4.50. The Zacks Consensus Estimate for 2025 EPS is pegged at $5.35 per share.
ALK is also hopeful of generating positive free cash flow while investing in the fleet, balance sheet and shareholder returns. Capital expenditures are expected to be between $1.4 billion and $1.5 billion in 2025. ALK anticipates to buyback shares worth $250 million in 2025.
Capacity is anticipated to increase 2% to 3%.
Upcoming Strategic Growth Plans Post Hawaiian Buy
ALK announced its upcoming growth plans in its first presentation after completing the Hawaiian Holdings acquisition on Sept. 18, 2024.
Alaska Air Group introduces “Alaska Accelerate,” its three-year strategic plan and vision for the combined company. Through this plan, Alaska Air Group aims to strengthen commercial performance, achieve medium-term financial targets, and unlock significant value creation in the future.
Alaska Air’s financial targets for 2027 include $1 billion in incremental profit, EPS of at least $10, double-digit pretax profit margins in the range of 11-13%, no margin dilution in the first year following the merger, synergy estimates doubled to at least $500 million.
ALK is also expanding globally with the launch of a new global gateway from Seattle to Tokyo Narita in Japan and Seoul Incheon in South Korea and expanding to at least 12 international widebody destinations by 2030. Daily nonstop Seattle-Tokyo Narita service starts in May 2025, offering guests an enticing nonstop option between the Pacific Northwest and Japan. Flights can be booked now at alaskaair.com and hawaiianairlines.com. Non-stop Seattle-Seoul Incheon service is slated to start in October 2025, with tickets available for purchase early next year.
The launch of a premium credit card with lucrative offers for global travelers to explore the expanding network should act as a tailwind for the airline company.
With contributions coming from network, product, loyalty and cargo, we expect ALK to generate the majority of the expected profit growth over the next three years, thereby unlocking an additional $800 million in revenues.
Bullish Q4 View of Other Airline Companies
In addition to ALK, Southwest Airlines Co. (LUV - Free Report) ), American Airlines (AAL - Free Report) and JetBlue Airways Corporation (JBLU - Free Report) have also provided encouraging fourth-quarter 2024 guidance backed by upbeat holiday travel demand.
LUV now anticipates its fourth-quarter revenue per available seat mile (RASM or unit revenues) to increase in the range of 5.5%-7% on a year-over-year basis. This marks an improvement from the previous forecast of growth of 3.5% to 5.5%. The upside was owing to improving industry demand trends, and the company's revenue management techniques paid off.
AAL lifted its fourth-quarter 2024 adjusted earnings per share guidance owing to favorable pricing and revenue environment. JBLU anticipates its fourth-quarter revenues to decline in the range of 2-5% on a year-over-year basis. This marks an improvement from the previous guidance of a 3%-7% decline. For 2024, total revenues are forecasted to tumble in the range of 3.5-4.5% (prior view: down 4-5%).