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Is a Beat Likely for Alaska Air Group (ALK) in Q4 Earnings?

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Alaska Air Group, Inc. (ALK - Free Report) is scheduled to report fourth-quarter 2019 results on Jan 28, after the market closes.

The Zacks Consensus Estimate for fourth-quarter earnings has been revised 1.9% upward in the past 90 days. Moreover, the company flaunts an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 9.2%.

Let’s see whether the company is able to repeat its success story in the fourth quarter as well.

Factors Likely at Play

Alaska Air Group’s top line is anticipated to have benefited from higher passenger revenues (accounting for more than 90% of total revenues), courtesy of strong air travel demand. The Zacks Consensus Estimate for passenger revenues indicates a 6.8% rise from the year-ago reported figure. Additionally, the carrier anticipates total revenue per available seat mile (RASM) to have increased 4.1% year over year in the fourth quarter.
 
The company expects traffic or revenue passenger miles (RPMs) to have increased 3.9% in the to-be-reported quarter, highlighting the solid demand for Alaska Air Group’s services. The Zacks Consensus Estimate for the same implies a 4.5% rise from the year-earlier reported figure.

On the bottom-line front, the airline is expected to have gained from low fuel prices as expenses on fuel comprise a major chunk of airline expenditures. The consensus mark for economic fuel cost per gallon hints at a 5.5% decline from the fourth-quarter 2018 reported number. The company estimates fuel costs to have been $2.21 in the fourth quarter, indicating a decrease of 6% from that reported a year ago.

However, the positive impact of low fuel prices on earnings might have been partly offset by escalating non-fuel unit costs. Cost per available seat mile (CASM) excluding fuel and special items (or non-fuel unit costs) is expected to have increased in the soon-to-be-reported quarter due to lower capacity from irregular operations in Seattle and certain other factors. While the company predicts the metric to have inched up 0.8% in the quarter, the Zacks Consensus Estimate for the same suggests a 0.4% rise from the fourth-quarter 2018 reported figure.

Alaska Air Group, Inc. Price and EPS Surprise

 

Alaska Air Group, Inc. Price and EPS Surprise

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

 

Earnings Whispers

The proven Zacks model predicts an earnings beat for Alaska Air Group in the fourth quarter of 2019 on the back of a perfect combination of the following two key ingredients: a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Alaska Air Group has an Earnings ESP of +1.89% as the Most Accurate Estimate is pegged at $1.44, higher than the Zacks Consensus Estimate $1.41. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Alaska Air Group carries a Zacks Rank #2.

Highlights of Q3 Earnings

In the last reported quarter, Alaska Air Group delivered a positive earnings surprise of 0.4%. Moreover, the bottom line surged 37.7% year over year on higher revenues and a 77% drop in merger-related costs. Revenues also surpassed the Zacks Consensus Estimate and increased 8% year over year owing to substantial rise in passenger revenues.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider Canadian Pacific Railway Limited (CP - Free Report) , Spirit Airlines, Inc. (SAVE - Free Report) and Norfolk Southern Corporation (NSC - Free Report) as these stocks too possess the right combination of elements to come up with an earnings beat in their next releases.

Canadian Pacific has an Earnings ESP of +0.39% and a Zacks Rank #3. The company will announce fourth-quarter financial numbers on Jan 29.

Spirit Airlines has an Earnings ESP of +3.24% and a Zacks Rank of 2. The company is set to report fourth-quarter earnings on Feb 5.

Norfolk Southern has an Earnings ESP of +0.36% and is Zacks #3 Ranked. The company will release fourth-quarter results on Jan 29.

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