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Alaska Air Group (ALK) Q4 Earnings: What's in the Offing?

Alaska Air GroupALK is slated to report fourth-quarter 2017 results on Jan 25, before the market opens.

In the third quarter of 2017, the company delivered a negative earnings surprise of 0.4%. The bottom line was hurt by higher costs. Results were also hurt due the impact of the back-to-back hurricanes.

Let's unearth the factors likely to influence the carrier's fourth-quarter results.

We expect high costs to hurt Alaska Air Group's fourth-quarter results as well. In fact, the company expects non-fuel unit costs to be in the range of 8.65 cents to 8.67 cents much higher than 8.45 cents reported in the year-ago quarter. The increased projection can be attributed to the costs associated with the pay-related deal inked with its pilots.

Increase in fuel costs are also likely to pressurize the bottom line. The company expects fuel costs per gallon (economic) to be $2 per gallon, higher than the Zacks Consensus Estimate of $1.97 and also the year-ago figure of $1.68 per gallon. Additionally, costs related to the acquisition of Virgin America are likely to push up operating expenses in the fourth quarter.

However, the top line is likely to be driven by the strong demand for air travel during the holiday season. The Zacks Consensus Estimate for passenger revenues in the to-be-reported quarter is pegged at $1,684 million, much higher than the year-ago figure of $1,484 million. Alaska Air Group expects passenger unit revenues in the band of 10.69 cents to 10.71 cents in the quarter.

What Does Our Model Say?

Our proven model does not show conclusively that Alaska Air Group will beat earnings in fourth-quarter 2017. This is because a stock needs to have both - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen. However, that is not the case as highlighted below.

Zacks ESP : Alaska Air Group has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 83 cents per share. 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 #3, which increases the predictive power of ESP. However, the company's 0.00% ESP makes surprise prediction inconclusive. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for fourth-quarter earnings is projected to be flat on a year-over-year basis mainly due to higher fuel costs. However, the same for sales is projected at $10.58 billion, up 8.1% year over year. The uptick is primarily owing to anticipated growth in passenger revenues.

Alaska Air Group, Inc. Price and EPS Surprise

Alaska Air Group, Inc. Price and EPS Surprise | Alaska Air Group, Inc. Quote

Stocks That Warrant a Look

Investors interested in the broader Zacks transportation industry may also consider Union Pacific Corporation UNP , United Parcel Service UPS and SkyWest SKYW as our model shows that they possess the right combination of elements to post an earnings beat in its next release.

Union Pacific Corporation has an Earnings ESP of +0.47% and a Zacks Rank #3. The company will release fourth-quarter 2017 results on Jan 25.

United Parcel Service has an Earnings ESP of +0.10% and a Zacks Rank #3. The company will release fourth-quarter 2017 results on Feb 1.

SkyWest has an Earnings ESP of +7.80% and a Zacks Rank #1. The company will release fourth-quarter 2017 results on Feb 1.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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