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Alaska Air (ALK) Q2 Earnings Surpass, Q3 RASM View Upbeat

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Alaska Air Group, Inc. (ALK - Free Report) delivered second-quarter 2019 adjusted earnings per share (excluding 6 cents from non-recurring items) of $2.17, beating the Zacks Consensus Estimate of $2.11. Moreover, the bottom line improved substantially year over year on higher revenues.

Revenues came in at $2,288 million, above the Zacks Consensus Estimate of $2,282 million. The top line also rose year over year. Passenger revenues — accounting for a bulk (92.3%) of the top line — were up 6% on a year-over-year basis.

Operating Statistics

Airline traffic, measured in revenue passenger miles, inched up 1.1% year over year in the reported quarter. Capacity or available seat miles expanded 0.9%. Load factor (percentage of seats occupied by passengers) improved 20 basis points to 86.2% as traffic growth outpaced capacity expansion in the quarter under review.

Total revenue per available seat mile (RASM: a key measure of unit revenues) increased 5.2% year over year to 13.48 cents in the quarter under discussion. Meanwhile, yield climbed 4.6% to 14.43 cents.

Alaska Air Group, Inc. Price, Consensus and EPS Surprise

 

Alaska Air Group, Inc. Price, Consensus and EPS Surprise

Alaska Air Group, Inc. price-consensus-eps-surprise-chart | Alaska Air Group, Inc. Quote


Operating Expenses & Income

In the quarter under review, total operating expenses were up 2% year over year to $1,924 million. Operating income jumped 34% from the prior-year quarter to $364 million. Fuel price (economic) was $2.27 per gallon, down 1.3%.

Consolidated cost per available seat mile — excluding fuel and special items — nudged up 2.3% to 8.33 cents.

Liquidity & Buybacks

At the end of the reported quarter, this Zacks Rank #2 (Buy) company had $1,627 million in cash and marketable securities compared with $1,236 million at the end of 2018. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alaska Air exited the quarter with long-term debt of $1,538 million compared with $1,617 million at the end of 2018. Adjusted debt-to-capitalization ratio was 45% compared with 47% in December 2018. The carrier repurchased 408,665 shares worth approximately $25 million during the first half of the year.

Q3 Outlook

The company envisions capacity to rise approximately 3% year over year in the third quarter. Additionally, RASM is estimated to ascend in the 2-5% range in the period. However, non-fuel unit costs (excluding special items) are projected to increase approximately 5% year over year. This includes a $34-million expected increase in labor-related costs. Meanwhile, economic fuel cost is forecast to decline 5.2% year over year to $2.21 in the current quarter.

2019 Outlook

For the full year, capacity is estimated to expand approximately 2.1% (prior view: increase of 2%) while non-fuel unit costs (excluding special items) are expected to rise nearly 2.2% compared with an increase of 2.1% expected earlier. The view includes costs associated with labor deal ratification and other employee-related costs. Also, capital expenditures are anticipated to be $725 million in the ongoing year, lower than $750 million estimated previously. Meanwhile, effective tax rate is still predicted to be approximately 26% in the year.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting second-quarter earnings reports from key players, such as Expeditors International of Washington, Inc. (EXPD - Free Report) , Air Lease Corporation (AL - Free Report) and Hertz Global Holdings, Inc (HTZ - Free Report) . While Expeditors and Hertz will report financial numbers on Aug 6, Air Lease will announce the same on Aug 8.

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