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What's in the Cards for Alaska Air (ALK) in Q3 Earnings?

Zacks Equity Research
·4-min read

Alaska Air Group, Inc. ALK is scheduled to release third-quarter 2020 results on Oct 22, before market open.

The Zacks Consensus Estimate for third-quarter bottom line has widened from a loss of $2.73 per share to a loss of $2.94 per share in the past 60 days.

Against this backdrop, let’s discuss the factors that might have impacted the company’s September-quarter performance.

Factors Likely in Play

In line with the second quarter, Alaska Air’s third-quarter performance is likely to have been dented by coronavirus-induced weak passenger revenues due to low air-travel demand. The Zacks Consensus Estimate for total passenger revenues indicates a 75.1% decline from the number reported in the year-ago quarter.

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In order to mitigate the low-demand scenario, the carrier is trimming its capacity. The Zacks Consensus Estimate for available seat miles (a measure of capacity) implies a 55.1% decrease from the number reported in the year-ago quarter. The Zacks Consensus Estimate for traffic (measured in revenue passenger miles) suggests a drop of 74.8% from the prior-year quarter’s reported figure.

With traffic declining faster than capacity cuts, load factor (% of seats filled by passengers) is likely to have tanked in the third quarter. Notably, the Zacks Consensus Estimate for Alaska Air’s third-quarter 2020 passenger load factor stands at a dismal 47.3%, a significant decline from 86% reported in third-quarter 2019.

Alaska Air Group, Inc. Price and EPS Surprise

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

However, decreased fuel prices might reflect on Alaska Air’s bottom line. Notably, the Zacks Consensus Estimate for economic fuel price per gallon suggests a 39.9% drop from the figure reported in the September quarter of 2019.

What the Zacks Model Unveils

Our proven model does not conclusively predict 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. But that is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Alaska Air has an Earnings ESP of +1.82%. 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 #4 (Sell), currently.

Highlights of Q2

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.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Knight-Swift Transportation Holdings KNX, United Parcel Service UPS and C.H. Robinson Worldwide CHRW as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

Knight-Swift has an Earnings ESP of +6.79% and is Zacks #2 Ranked, presently. The company will release third-quarter 2020 results on Oct 21.

UPS has an Earnings ESP of +5.40% and a Zacks Rank of 2 at present. The company will release third-quarter 2020 results on Oct 28.

C.H. Robinson has an Earnings ESP of +1.35% and is currently a #2 Ranked player. The company will release third-quarter 2020 results on Oct 27.

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United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
 
C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report
 
KnightSwift Transportation Holdings Inc. (KNX) : Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
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Zacks Investment Research