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Alaska Air Group (ALK) Beats on Q4 Earnings, Hikes Dividend

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Alaska Air Group’s (ALK - Free Report) fourth-quarter 2019 earnings per share of $1.46 beat the Zacks Consensus Estimate by 5 cents. Moreover, the bottom line surged 94.7% year over year on low fuel costs.

Revenues came in at $2,228 million, surpassing the Zacks Consensus Estimate of $2,220.5 million. The top line also increased approximately 8% year over year. Passenger revenues — contributing 92.3% to the top line — were up 8% on a year-over-year basis.

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

Moreover, this Zacks Rank #3 (Hold) company announced a 7.1% hike in quarterly dividend to 37.5 cents per share (annualized $3). The first installment of the new dividend will be paid on March 5, to shareholders of record as of Feb 18, 2020. The latest increase marks the seventh such instance since the carrier started paying dividends in July 2013.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Operating Statistics

Consolidated traffic, measured in revenue passenger miles, rose 3.9% year over year in the reported quarter. Capacity (measured in available seat miles) expanded 3.5%. Load factor (percentage of seats occupied by passengers) improved 40 basis points to 83.7% as traffic growth outpaced capacity expansion in the reported quarter.

Total revenue per available seat mile (RASM: a key measure of unit revenues) increased 4.2% year over year to 13.38 cents in the quarter under discussion. Meanwhile, yield climbed 3.7% to 14.77 cents.

Operating Expenses & Income

In the fourth quarter, total operating expenses (on a reported basis) were down 2% year over year to $1,976 million with expenses on aircraft fuel (including hedging gains and losses) declining 13%. Fuel price (economic) was $2.21 per gallon, down 6% year over year.

Expenses on wages and benefits, however, flared up 14% in the December-end quarter. Operating income increased in excess of 100% from the prior-year quarter’s level to $252 million. Consolidated cost per available seat mile — excluding fuel and special items — inched up 0.7% to 9.01 cents.

Liquidity & Buybacks

At the end of 2019, this Seattle, WA-based company had $ 1,521 million in cash and marketable securities compared with $1,236 million at the end of 2018.

Alaska Air exited the year with long-term debt of $1,264 million compared with $1,617 million at the end of 2018. Adjusted debt-to-capitalization ratio was 41% compared with 47% in December 2018. The carrier repurchased 1,192,820 shares worth roughly $75 million in 2019.

Q1 Outlook

The company envisions capacity to rise approximately 4% year over year in the first quarter of 2020. Additionally, non-fuel unit costs (excluding special items) are projected to be up approximately 3% for the March-end quarter. RASM is projected to increase in the 0.5-3.5% band. Meanwhile, economic fuel cost is projected at $2.21.

2020 Outlook

The company expects capacity for the full year to increase between 3% and 4% from 2019 levels. Non-fuel unit costs (excluding special items) are expected to rise roughly 2%. Meanwhile, capital expenditures are currently anticipated to be approximately $750 million in the current year.

Upcoming Releases

Investors interested in the broader Transportation sector are awaiting fourth-quarter 2019 earnings reports from key players like Air Lease Corporation (AL - Free Report) , Expeditors International of Washington (EXPD - Free Report) and Hertz Global Holdings (HTZ - Free Report) .

Air Lease and Expeditors will announce results on Feb 14 and Feb 18, respectively. Hertz will release fourth-quarter earnings numbers on Feb 24.

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