Alaska Air Group's (ALK) 2025 and 2027 targets were "well above" expectations, while the company has multiple drivers to help it achieve its target of $1 billion in incremental profits in 2027, UBS Securities said in a note e-mailed Wednesday.

On Tuesday, the Alaska Airlines parent raised its Q4 earnings guidance and said it expected 2025 EPS of at least $5.75 and 2027 EPS of at least $10.

"ALK's analyst meeting highlighted multiple drivers of revenue growth and margin expansion which support their target of $1 [billion] in incremental profits in 2027 off a 2024 base," UBS analysts Thomas Wadewitz and Atul Maheswari said in a note to clients.

The company's upgraded Q4 outlook shows the favorable cycle and revenue per available seat mile backdrop, the analysts said. However, its three-year financial framework is likely mainly driven by its own measures to capture synergies from its recently completed acquisition of Hawaiian Airlines parent Hawaiian Holdings and continuing execution of its focus on increasing premium and loyalty revenue, according to the note.

UBS increased its 2025 EPS view to $6.05 from $5.22 and its 2026 EPS outlook to $8.07 from $7.23.

"We note ALK indicated a strong cycle backdrop and a period of limited industry capacity growth could be a source of upside to their 2027 framework," the analysts said.

UBS's updated 2027 EPS forecast of $11.31 exceeds Alaska Air's guidance of at least $10, and the firm's assumption of a pretax margin at the low end of the company's 11% to 13% range highlights further upside potential if favorable industry conditions persist.

UBS raised its price target on the stock to $81 from $72 while maintaining its buy rating.

The company's shares were up 2% in recent trading.

Price: 62.49, Change: +1.20, Percent Change: +1.96