It has been about a month since the last earnings report for Alaska Air Group, Inc. (ALK - Free Report) . Shares have lost about 15.3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Second Quarter Earnings
Alaska Air Group performed well in the second quarter of 2017. The carrier’s earnings of $2.51 per share beat the Zacks Consensus Estimate by a penny. Moreover, the bottom line expanded 18.4% on a year-over-year basis. Results were aided by higher revenues.
Revenues came in at $2,102 million, just ahead of the Zacks Consensus Estimate of $2,096.3 million. The top line grew 41% on a year-over-year basis. In fact, passenger revenues that improved 43% on a year-over-year basis, accounted for bulk of the top line (86%).
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 . While total revenue per available seat mile (RASM) declined 0.4% in the reported quarter, yield declined 0.8%.
Operating Expenses & Income
In the quarter under review, total operating expenses (on a reported basis) rose 50% year over year to $1,609 million primarily owing to the 41% rise in wages and benefits. Operating income increased 18% to $493 million from the prior-year quarter. Fuel price (economic) was $1.71 per gallon, up 11.8%. Consolidated unit cost or cost per available seat mile – excluding fuel and special items – increased 2.1% to 7.94 cents backed by high labor costs.
At the end of the quarter, the company had $1,922 million in cash and marketable securities compared with $1,580 million at the end of 2016. Alaska Air Group exited the quarter with long-term debt of $2,469 million compared with $2,645 million at the end of 2016. At the end of the quarter, adjusted debt-to-capitalization ratio was 55% compared with 59% at 2016-end.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month. The consensus estimate has shifted lower by 9.9% due to these changes.
Alaska Air Group, Inc. Price and Consensus
At this time, Alaska Air's stock has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.