A month has gone by since the last earnings report for Alaska Air Group (ALK). Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alaska Air due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Alaska Air reported solid fourth-quarter 2024 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Quarterly earnings per share (EPS) of 97 cents outpaced the Zacks Consensus Estimate of 47 cents and improved more than 100% on a year-over-year basis. The reported figure exceeded the guided range of 40-50 cents.
The bottom line benefited from solid revenue growth, cost and operational performance throughout the quarter and holiday travel periods. ALK also benefited from a renegotiation of certain interest payments and favorability in its fourth-quarter tax rate.
Operating revenues of $3.53 billion beat the Zacks Consensus Estimate of $3.51 billion. The top line jumped 38.4% year over year, with passenger revenues accounting for 89.9% of the top line and increasing 37% owing to the continued recovery in air-travel demand.
Passenger revenues totaled $3.17 billion in the reported quarter. On a year-over-year basis, cargo and other revenues of $132 million grew 113% year over year. Mileage plan other revenues grew 36% to $224 million.
Fourth-quarter revenues were stronger than expected across Alaska and Hawaiian, backed by sustained leisure demand and an uptick in corporate travel, which improved close in demand. ALK delivered reliable operational performance for its guests throughout the holiday travel period, with higher-than-expected completion rate and load factor. Revenue per available seat mile (RASM: a key measure of unit revenues) grew 4% to 15.54 cents. Yield increased 1% to 16.67 cents.
Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) grew 35% to 19.06 billion. To cater to this increased demand, capacity (measured in average seat miles) rose 33% to 22.74 billion. As traffic outpaced capacity expansion, the consolidated load factor (percentage of seat occupancy) rose 0.9 percentage points to 83.8%. In the fourth quarter, total operating expenses (on a reported basis) increased 37% to $3.46 billion. Economic fuel price per gallon fell 26% to $2.54. The reported figure lies below the guided range of $2.55-$2.65.
Consolidated operating costs per available seat mile (excluding fuel and special items) grew 8.6% as disciplined non-fuel cost performance offset higher performance-based pay accruals and better completion rates drove higher capacity.
As of Dec. 31, 2024, Alaska Air had $1.20 billion of cash and cash equivalents compared with $1.01 billion at the end of the prior quarter. ALK exited the fourth quarter of 2024 with long-term debt (net of current portion) of $4.49 billion compared with $4.15 billion at the prior-quarter end. Debt-to-capitalization ratio was 45%.
During the fourth quarter, ALK repurchased 3.9 million shares for $250 million, bringing the total repurchases to 5.5 million shares for $312 million in 2024. ALK authorized a new $1 billion dollar share repurchase plan to be executed over the next four years, with repurchases starting in January 2025
ALK anticipates first-quarter 2025 adjusted loss per share in the range of 50-70 cents. The company expects available seat miles (a measure of capacity) to increase in the range of 2.5%-3.5% in the first quarter of 2025 from the first quarter of 2024 actuals. CASM is expected to increase in the range of low-single digits to mid-single digits, and RASM is expected to grow in the high single digits.
For 2025, EPS is anticipated to remain above $5.75.For 2025, capacity is expected to be up 2% to 3% year over year.
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -112.09% due to these changes.
At this time, Alaska Air has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Alaska Air has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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