Will Alaska Air (ALK) Perform Better This Earnings Season?

Alaska Air Group, Inc. ALK is slated to release second-quarter 2020 earnings results on Jul 23, before market open.

The Zacks Consensus Estimate for second-quarter bottom line has been narrowed from a loss of $3.73 per share to a loss of $3.39 per share in the past 60 days. Moreover, it has an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters. The company has trailing four-quarter earnings surprise of 10.5%, on average.

Let’s discuss whether the company will likely sustain its beat streak in the June quarter as well.

Factors Likely at Play

Alaska Air’s passenger revenues are expected to have been severely affected by unprecedented drop in passenger demand leading to capacity cuts of approximately 78% and 79% during April and May, respectively. This measure was undertaken due to rise in government travel restrictions amid coronavirus concerns. The carrier also expects its June capacity to have declined approximately 70% year over year. Notably, the Zacks Consensus Estimate for total passenger revenues indicates a 91.6% decline sequentially.

Additionally, operating expenses are expected to have escalated during the to-be-reported quarter thanks to COVID-19 induced low passenger revenues and high costs on wages and benefits.

With coronavirus affecting demand significantly, low fuel prices are expected to have partly offset the adversities and contributed to the bottom line in the second quarter. The consensus mark for economic fuel cost per gallon indicates a 43% decline from its March end 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

What Does the Zacks Model Say?

Our proven model predicts a bottom line outperformance for Alaska Air this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Alaska Air has an Earnings ESP of +16.33%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Alaska Air carries a Zacks Rank #3, currently.

Highlights of Q1

Alaska Air incurred a loss of 82 cents per share (excluding $1.05 from non-recurring items) in the first quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of $1.27. In the year-ago quarter, the company reported earnings of 17 cents. The deterioration was due to unprecedented drop in air travel demand in the wake of the coronavirus outbreak. Revenues came in at $1,636 million, missing the Zacks Consensus Estimate of $1,691.1 million. The top line also declined approximately 13% year over year. Passenger revenues — contributing 90.5% to the top line — were down 14% on a year-over-year basis.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also check out some other stocks worth considering like United Airlines Holdings, Inc. UAL, Southwest Airlines Co. LUV and Air Lease Corporation AL as these too possess the perfect combination to post an earnings beat.

United Airlines has an Earnings ESP of +20.59% and a Zacks Rank #3, currently. The company will release second-quarter 2020 results on Jul 21.

Southwest Airlines presently has an Earnings ESP of +18.02% and is a #3 Ranked player. The company will release second-quarter 2020 results on Jul 23.

Air Lease has an Earnings ESP of +23.32% and is Zacks #3 Ranked at present. The company will release second-quarter 2020 results on Aug 6.

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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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