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Alaska Air (ALK) Up 2.4% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Alaska Air Group (ALK - Free Report) . Shares have added about 2.4% 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.

Alaska Air Group Beats on Q1 Earnings

Alaska Air Group delivered first-quarter 2019 adjusted earnings per share of 17 cents, beating the Zacks Consensus Estimate of 13 cents. Moreover, the bottom line improved on a year-over-year basis.

Revenues came in at $1,876 million, above the Zacks Consensus Estimate of $1,872.97 million. The top line also rose year over year. Passenger revenues, accounting for a bulk (91.5%) of the top line, were up 2% on a year-over-year basis.

Operating Statistics

Airline traffic, measured in revenue passenger miles, inched up 0.4% year over year in the reported quarter. Capacity or available seat miles expanded 0.2%. Load factor (percentage of seats occupied by passengers) improved 20 basis points to 80.3% as traffic growth outpaced capacity expansion in the reported quarter.

Total revenue per available seat mile (RASM: a key measure of unit revenues) increased 2.2% year over year to 12.10 cents in the quarter . Meanwhile, yield rose 1.5% to 13.78 cents.

Operating Expenses & Income

In the quarter under review, total operating expenses were up 3% year over year to $1,851 million. Operating income declined 14% from the prior-year quarter to $25 million. Fuel price (economic) was $2.13 per gallon, down 0.5%.

Consolidated cost per available seat mile — excluding fuel and special items — nudged up 2.8% to 9.06 cents.

Liquidity & Buybacks

At the end of the reported quarter, the company had $1,436 million in cash and marketable securities compared with $1,236 million at the end of 2018.

Alaska Air Group exited the quarter with long-term debt of $1,664 million compared with $1,617 million at the end of 2018. Adjusted debt-to-capitalization ratio was 47%, flat compared to that in December 2018. The carrier repurchased 214,891 shares worth approximately $13 million during the first quarter of 2019.


Q2 & 2019 Outlook

The company anticipates capacity to rise approximately 1% in the second quarter of 2019. Additionally, RASM is estimated to increase in the 2-5% range in the period. Non-fuel unit costs (excluding special items) are projected to increase approximately 5% year over year. Meanwhile, economic fuel cost is forecast to be flat year over year at $2.13 per gallon in the current quarter.

For the full year, capacity is estimated to expand approximately 2% while non-fuel unit costs (excluding special items) are expected to rise nearly 2.1%. Also, capital expenditures are anticipated to be $750 million in the ongoing year. Meanwhile, effective tax rate is predicted to be approximately 26% in the year.

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 -14.99% due to these changes.

VGM Scores

Currently, Alaska Air has a nice Growth Score of B, 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 #3 (Hold). We expect an in-line return from the stock in the next few months.


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