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Why is Alaska Air Group Stock Down More Than 20% This Year?
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Alaska Air Group (ALK - Free Report) has confronted multiple headwinds due to the recent hurricanes and escalating costs like many of its fellow airline operators so far in 2017.
Consequently, shares of the company have declined 24.2%, significantly underperforming the Zacks Airline industry’s rally of 15.1% on a year-to-date basis.
Lets have a deeper look into the headwinds.
Alaska Air Group’s performance with respect to passenger unit revenues is concerning. This is because passenger revenue per available seat mile (PRASM: a key measure of unit revenue) decreased 4.2% and total revenue per available seat mile (TRASM) declined 6.1% in the third quarter of 2017.
Last year, Alaska Air Group acquired Virgin America. Though positive on the deal, we note that this transaction has integration risks attached to it. In fact, merger-related costs contributed to the 44% rise in total operating expenses (on a reported basis) in the third quarter of 2017. Labor costs too increased backed by the company’s pay-related deal with its pilots.
The increase in fuel costs are also limiting bottom-line growth. For example, fuel price increased 13.9% to $1.80 per gallon in the third quarter.
Moreover, Alaska Air Group like its fellow airline operators such as United Continental Holdings (UAL - Free Report) , Spirit Airlines (SAVE - Free Report) and Southwest Airlines (LUV - Free Report) has been hit hard by the back-to-back hurricanes this year. Additionally, Alaska Air Group’s high debt levels raise concerns.
Zacks Rank & Style Score
Taking into account the above-mentioned headwinds, we believe that investors should stay away from the stock right now. Alaska Air Group’s Zacks Rank #4 (Sell) also supports our view, indicating that the stock is likely to underperform the broader market over the next one to three months. Furthermore, the company’s Momentum Score of F highlights its short-term attractiveness.
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Why is Alaska Air Group Stock Down More Than 20% This Year?
Alaska Air Group (ALK - Free Report) has confronted multiple headwinds due to the recent hurricanes and escalating costs like many of its fellow airline operators so far in 2017.
Consequently, shares of the company have declined 24.2%, significantly underperforming the Zacks Airline industry’s rally of 15.1% on a year-to-date basis.
Lets have a deeper look into the headwinds.
Alaska Air Group’s performance with respect to passenger unit revenues is concerning. This is because passenger revenue per available seat mile (PRASM: a key measure of unit revenue) decreased 4.2% and total revenue per available seat mile (TRASM) declined 6.1% in the third quarter of 2017.
Last year, Alaska Air Group acquired Virgin America. Though positive on the deal, we note that this transaction has integration risks attached to it. In fact, merger-related costs contributed to the 44% rise in total operating expenses (on a reported basis) in the third quarter of 2017. Labor costs too increased backed by the company’s pay-related deal with its pilots.
The increase in fuel costs are also limiting bottom-line growth. For example, fuel price increased 13.9% to $1.80 per gallon in the third quarter.
Moreover, Alaska Air Group like its fellow airline operators such as United Continental Holdings (UAL - Free Report) , Spirit Airlines (SAVE - Free Report) and Southwest Airlines (LUV - Free Report) has been hit hard by the back-to-back hurricanes this year. Additionally, Alaska Air Group’s high debt levels raise concerns.
Zacks Rank & Style Score
Taking into account the above-mentioned headwinds, we believe that investors should stay away from the stock right now. Alaska Air Group’s Zacks Rank #4 (Sell) also supports our view, indicating that the stock is likely to underperform the broader market over the next one to three months. Furthermore, the company’s Momentum Score of F highlights its short-term attractiveness.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>