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Alaska Air (ALK) Down 5.1% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Alaska Air Group (ALK - Free Report) . Shares have lost about 5.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Alaska Air due for a breakout? 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.

Alaska Air Group Beats on Q4 Earnings

Alaska Air Group reported fourth-quarter 2018 earnings per share (excluding 56 cents from non-recurring items) of 75 cents, surpassing the Zacks Consensus Estimate of 73 cents.

Revenues came in at $2,064 million, above the Zacks Consensus Estimate of $2057.3 million. The top line also rose year over year. Passenger revenues, accounting for a bulk (92.4%) of the top line, were up 6% on a year-over-year basis.

Operating Statistics

Airline traffic, measured in revenue passenger miles, inched up 1% year over year in the reported quarter. Capacity or available seat miles expanded 1.1%. Load factor (percentage of seats occupied by passengers) contracted 10 basis points to 83.3% as capacity expansion outweighed traffic growth in the reported quarter.

Total revenue per available seat mile (RASM: a key measure of unit revenues) increased 5.2% year over year to 12.84 cents in the quarter under discussion. Meanwhile, yield augmented 5.2% to 14.24 cents.

Operating Expenses & Income

In the reported quarter, total operating expenses were up 12% year over year to $2,018 million. Operating income plunged 66% from the prior-year quarter to $46 million. Fuel price (economic) was $2.35 per gallon, up 17.5%.

Consolidated cost per available seat mile — excluding fuel and special items — nudged up 3.1% to 8.95 cents.

Liquidity & Buybacks

At the end 2018, the company had $1,236 million in cash and marketable securities compared with $1,621 million at the end of 2017.

Alaska Air Group exited the quarter with long-term debt of $1,617 million compared with $2,262 million at the end of 2017. Adjusted debt-to-capitalization ratio was 47% as compared to 53% at 2017 end. Moreover, the carrier repurchased 776,186 shares for approximately $50 million in 2018.

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 -47.87% due to these changes.

VGM Scores

Currently, Alaska Air has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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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