What's in Store for Alaska Air (ALK) this Earnings Season?

Alaska Air Group ALK is slated to report its first-quarter 2017 results on Apr 26, before the market opens.

In the fourth quarter of 2016, the company posted a positive earnings surprise of 10.64%. Moreover the company beat the Zacks Consensus Estimate in each of the four quarters with an average positive surprise of 5.5%. Let’s see how things are shaping up for this announcement.

Despite its impressive fourth-quarter results, an earnings beat does not seem to be too likely for Alaska Air. The pessimism surrounding the stock ahead of its first quarter earnings release can be made out from the fact that the Zacks Consensus Estimate has slipped 4 cents to $1.06 over the last seven days.

Price Performance

Shares of Alaska Air underperformed the Zackscategorized Transportation - Airline industry over the last three months. The stock lost 4% while the industry gained 4.22%.

Factors at Play

Alaska Air’s high debt levels raise concern. Also, the costs related to its acquisition of Virgin America, completed late last year, might hurt the bottom line in the first quarter. We expect a detailed commentary on the progress of the integration process on the conference call.

Following the buyout, Alaska Air has expanded significantly, particularly along the West Coast.We are also positive on the U.S. Transportation Department's decision to award (tentatively) Mexico City slots to the carrier. Other carriers that have been awarded slots are JetBlue Airways Corp. JBLU and Southwest Airlines Co. LUV. We are also impressed by Alaska Air’s move to raise its quarterly dividend by 9% to 30 cents per share, earlier in the year.

Earnings Whispers

According to our proven model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase the odds of an earnings surprise. However, that is not the case as highlighted below.

Zacks ESP: The Earnings ESP for Alaska Air is -2.83% as the Most Accurate estimate is pegged at $1.03 while the Zacks Consensus Estimate is at $1.06. 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 which increases the predictive power of ESP. However, the company’s negative ESP complicates our surprise prediction.

Please note that Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Alaska Air Group, Inc. Price and EPS Surprise

 

Alaska Air Group, Inc. Price and EPS Surprise | Alaska Air Group, Inc. Quote

Stock to Consider

Investors interested in the airline space may consider American Airlines Group AAL as our model shows that the company possesses the right combination of elements to post an earnings beat this quarter.

American Airlines has an Earnings ESP of +3.64% and a Zacks Rank #3. The company will report first-quarter results on Apr 27. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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