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Alaska Air (ALK) Up 9.5% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Alaska Air Group (ALK - Free Report) . Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alaska Air due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at Alaska Air in Q4
Alaska Air reported solid fourth-quarter 2024 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Quarterly earnings per share (EPS) of 97 cents outpaced the Zacks Consensus Estimate of 47 cents and improved more than 100% on a year-over-year basis. The reported figure exceeded the guided range of 40-50 cents.
The bottom line benefited from solid revenue growth, cost and operational performance throughout the quarter and holiday travel periods. ALK also benefited from a renegotiation of certain interest payments and favorability in its fourth-quarter tax rate.
Operating revenues of $3.53 billion beat the Zacks Consensus Estimate of $3.51 billion. The top line jumped 38.4% year over year, with passenger revenues accounting for 89.9% of the top line and increasing 37% owing to the continued recovery in air-travel demand.
Passenger revenues totaled $3.17 billion in the reported quarter. On a year-over-year basis, cargo and other revenues of $132 million grew 113% year over year. Mileage plan other revenues grew 36% to $224 million.
Fourth-quarter revenues were stronger than expected across Alaska and Hawaiian, backed by sustained leisure demand and an uptick in corporate travel, which improved close in demand. ALK delivered reliable operational performance for its guests throughout the holiday travel period, with higher-than-expected completion rate and load factor. Revenue per available seat mile (RASM: a key measure of unit revenues) grew 4% to 15.54 cents. Yield increased 1% to 16.67 cents.
Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) grew 35% to 19.06 billion. To cater to this increased demand, capacity (measured in average seat miles) rose 33% to 22.74 billion. As traffic outpaced capacity expansion, the consolidated load factor (percentage of seat occupancy) rose 0.9 percentage points to 83.8%. In the fourth quarter, total operating expenses (on a reported basis) increased 37% to $3.46 billion. Economic fuel price per gallon fell 26% to $2.54. The reported figure lies below the guided range of $2.55-$2.65.
Consolidated operating costs per available seat mile (excluding fuel and special items) grew 8.6% as disciplined non-fuel cost performance offset higher performance-based pay accruals and better completion rates drove higher capacity.
Liquidity
As of Dec. 31, 2024, Alaska Air had $1.20 billion of cash and cash equivalents compared with $1.01 billion at the end of the prior quarter. ALK exited the fourth quarter of 2024 with long-term debt (net of current portion) of $4.49 billion compared with $4.15 billion at the prior-quarter end. Debt-to-capitalization ratio was 45%.
During the fourth quarter, ALK repurchased 3.9 million shares for $250 million, bringing the total repurchases to 5.5 million shares for $312 million in 2024. ALK authorized a new $1 billion dollar share repurchase plan to be executed over the next four years, with repurchases starting in January 2025
ALK’s Outlook
ALK anticipates first-quarter 2025 adjusted loss per share in the range of 50-70 cents. The company expects available seat miles (a measure of capacity) to increase in the range of 2.5%-3.5% in the first quarter of 2025 from the first quarter of 2024 actuals. CASM is expected to increase in the range of low-single digits to mid-single digits, and RASM is expected to grow in the high single digits.
For 2025, EPS is anticipated to remain above $5.75.For 2025, capacity is expected to be up 2% to 3% year over year.
Alaska Air incurred a loss of 82 cents per share (excluding $1.05 from non-recurring items) in the first quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of $1.27. In the year-ago quarter, the company reported earnings of 17 cents. The downturn is due to unprecedented drop in air travel demand in the wake of the coronavirus outbreak. Having started in February, the downfall aggravated in March, with cancellations exceeding bookings. Demand is around 90% below the normal level. Revenues came in at $1,636 million, missing the Zacks Consensus Estimate of $1,691.1 million. The top line also declined approximately 13% year over year. Passenger revenues — contributing 90.5% to the top line — were down 14% on a year-over-year basis.
Operating Statistics Consolidated traffic, measured in revenue passenger miles, declined 14.4% year over year in the reported quarter. Capacity (measured in available seat miles) dropped 1.3%. Load factor (percentage of seats occupied by passengers) deteriorated 1,070 basis points to 69.6% as traffic declined more than the amount of capacity contraction.
Total revenue per available seat mile (RASM: a key measure of unit revenues) fell 11.7% year over year to 10.69 cents in the quarter under discussion. Meanwhile, yield inched up 0.9% to 13.9 cents. Operating Expenses & Income In the first quarter, total operating expenses (on a reported basis) were up 6% year over year to $1,957 million, with expenses on wages and benefits increasing 10%. Fuel price (economic) was $1.93 per gallon, down 9.4% year over year. The company reported operating loss of $321 million in the first quarter against operating income of $25 million in the year-ago quarter. Consolidated cost per available seat mile — excluding fuel and special items — inched up 1.8% to 9.22 cents. Liquidity At the end of the first quarter, this Seattle, WA-based company had $2,125 million in cash and marketable securities compared with $1,521 million at the end of 2019. The company exited the quarter with long-term debt of $1,203 million compared with $1,264 million at the end of 2019. Adjusted debt-to-capitalization ratio was 48% compared with 41% at the end of December 2019.
Airline traffic, measured in revenue passenger miles, rose 44.2% year over year to 13,554 million in the reported quarter. Capacity or available seat miles increased 41.1% to 15,612 million. Load factor (percentage of seats filled by passengers) increased 190 basis points to 86.8% owing to traffic growth outpacing capacity expansion.
Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) increased 1.3% year over year to 11.57 cents. While total revenue per available seat mile (RASM) declined 0.4% to 13.46 cents in the reported quarter, yield declined 0.8% to 13.33 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -112.09% due to these changes.
VGM Scores
At this time, Alaska Air has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Alaska Air has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Alaska Air (ALK) Up 9.5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Alaska Air Group (ALK - Free Report) . Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alaska Air due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at Alaska Air in Q4
Alaska Air reported solid fourth-quarter 2024 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Quarterly earnings per share (EPS) of 97 cents outpaced the Zacks Consensus Estimate of 47 cents and improved more than 100% on a year-over-year basis. The reported figure exceeded the guided range of 40-50 cents.
The bottom line benefited from solid revenue growth, cost and operational performance throughout the quarter and holiday travel periods. ALK also benefited from a renegotiation of certain interest payments and favorability in its fourth-quarter tax rate.
Operating revenues of $3.53 billion beat the Zacks Consensus Estimate of $3.51 billion. The top line jumped 38.4% year over year, with passenger revenues accounting for 89.9% of the top line and increasing 37% owing to the continued recovery in air-travel demand.
Passenger revenues totaled $3.17 billion in the reported quarter. On a year-over-year basis, cargo and other revenues of $132 million grew 113% year over year. Mileage plan other revenues grew 36% to $224 million.
Fourth-quarter revenues were stronger than expected across Alaska and Hawaiian, backed by sustained leisure demand and an uptick in corporate travel, which improved close in demand. ALK delivered reliable operational performance for its guests throughout the holiday travel period, with higher-than-expected completion rate and load factor. Revenue per available seat mile (RASM: a key measure of unit revenues) grew 4% to 15.54 cents. Yield increased 1% to 16.67 cents.
Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) grew 35% to 19.06 billion. To cater to this increased demand, capacity (measured in average seat miles) rose 33% to 22.74 billion. As traffic outpaced capacity expansion, the consolidated load factor (percentage of seat occupancy) rose 0.9 percentage points to 83.8%. In the fourth quarter, total operating expenses (on a reported basis) increased 37% to $3.46 billion. Economic fuel price per gallon fell 26% to $2.54. The reported figure lies below the guided range of $2.55-$2.65.
Consolidated operating costs per available seat mile (excluding fuel and special items) grew 8.6% as disciplined non-fuel cost performance offset higher performance-based pay accruals and better completion rates drove higher capacity.
Liquidity
As of Dec. 31, 2024, Alaska Air had $1.20 billion of cash and cash equivalents compared with $1.01 billion at the end of the prior quarter. ALK exited the fourth quarter of 2024 with long-term debt (net of current portion) of $4.49 billion compared with $4.15 billion at the prior-quarter end. Debt-to-capitalization ratio was 45%.
During the fourth quarter, ALK repurchased 3.9 million shares for $250 million, bringing the total repurchases to 5.5 million shares for $312 million in 2024. ALK authorized a new $1 billion dollar share repurchase plan to be executed over the next four years, with repurchases starting in January 2025
ALK’s Outlook
ALK anticipates first-quarter 2025 adjusted loss per share in the range of 50-70 cents. The company expects available seat miles (a measure of capacity) to increase in the range of 2.5%-3.5% in the first quarter of 2025 from the first quarter of 2024 actuals. CASM is expected to increase in the range of low-single digits to mid-single digits, and RASM is expected to grow in the high single digits.
For 2025, EPS is anticipated to remain above $5.75.For 2025, capacity is expected to be up 2% to 3% year over year.
Having started in February, the downfall aggravated in March, with cancellations exceeding bookings. Demand is around 90% below the normal level.
Revenues came in at $1,636 million, missing the Zacks Consensus Estimate of $1,691.1 million. The top line also declined approximately 13% year over year. Passenger revenues — contributing 90.5% to the top line — were down 14% on a year-over-year basis.
Operating Statistics
Consolidated traffic, measured in revenue passenger miles, declined 14.4% year over year in the reported quarter. Capacity (measured in available seat miles) dropped 1.3%. Load factor (percentage of seats occupied by passengers) deteriorated 1,070 basis points to 69.6% as traffic declined more than the amount of capacity contraction.
Total revenue per available seat mile (RASM: a key measure of unit revenues) fell 11.7% year over year to 10.69 cents in the quarter under discussion. Meanwhile, yield inched up 0.9% to 13.9 cents.
Operating Expenses & Income
In the first quarter, total operating expenses (on a reported basis) were up 6% year over year to $1,957 million, with expenses on wages and benefits increasing 10%. Fuel price (economic) was $1.93 per gallon, down 9.4% year over year.
The company reported operating loss of $321 million in the first quarter against operating income of $25 million in the year-ago quarter. Consolidated cost per available seat mile — excluding fuel and special items — inched up 1.8% to 9.22 cents.
Liquidity
At the end of the first quarter, this Seattle, WA-based company had $2,125 million in cash and marketable securities compared with $1,521 million at the end of 2019.
The company exited the quarter with long-term debt of $1,203 million compared with $1,264 million at the end of 2019. Adjusted debt-to-capitalization ratio was 48% compared with 41% at the end of December 2019.
Airline traffic, measured in revenue passenger miles, rose 44.2% year over year to 13,554 million in the reported quarter. Capacity or available seat miles increased 41.1% to 15,612 million. Load factor (percentage of seats filled by passengers) increased 190 basis points to 86.8% owing to traffic growth outpacing capacity expansion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -112.09% due to these changes.
VGM Scores
At this time, Alaska Air has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Alaska Air has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.