Technology

Why Is Alaska Air (ALK) Down 3.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Alaska Air Group (ALK). Shares have lost about 3.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Alaska Air due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Alaska Air's Q2 Loss Wider Than Expected

Alaska Air Group incurred a loss of $3.54 per share (excluding $1.81 from non-recurring items) in the second quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $3.39. In the year-ago quarter, the company reported earnings of $2.17. Amid coronavirus concerns, significantly low air travel demand weighed on the company’s performance.

Revenues came in at $421 million, surpassing the Zacks Consensus Estimate of $307.7 million. The top line declined 82% year over year. Passenger revenues — contributing 73.4% to the top line — were down 85% on a year-over-year basis due to weak travel demand.

Operating Statistics

Consolidated traffic, measured in revenue passenger miles, declined 88.7% year over year in the reported quarter. Capacity (measured in available seat miles) dropped 74.6%. Load factor (percentage of seats occupied by passengers) deteriorated 4780 basis points to 38.4% as traffic declined more than the amount of capacity contraction.

Total revenue per available seat mile (“RASM”: a key measure of unit revenues) fell 27.5% year over year to 9.77 cents in the quarter under discussion. Meanwhile, yield increased 29.5% to 18.68 cents.

Operating Expenses & Income

In the second quarter, total operating expenses (on a reported basis) dropped 63% year over year to $709 million. Fuel price (economic) was $1.2 per gallon, down 47.1% year over year.

The company reported operating loss of $288 million in the second quarter against operating income of $364 million in the year-ago quarter. Consolidated cost per available seat mile — excluding fuel and special items — surged more than 100% to 21.87 cents.

Liquidity

At the end of the second quarter, this Seattle, WA-based company had $2,803 million in cash and marketable securities compared with $1,521 million at the end of 2019.

The company exited the quarter with long-term debt of $1,549 million compared with $1,264 million at the end of 2019. Adjusted debt-to-capitalization ratio was 51% compared with 41% at the end of December 2019.




















How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -138.66% due to these changes.

VGM Scores

At this time, Alaska Air has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, 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 A. 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. It's no surprise Alaska Air has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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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.

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