Alaska Air Group (ALK) shares have dipped by approximately 5.2% since the last earnings report, lagging behind the S&P 500. Investors are now wondering if the recent negative trend will continue leading up to the next earnings release, or if Alaska Air is poised for a rebound. Let’s delve into the most recent earnings report and explore how analysts and investors have reacted.
In the second quarter of 2024, Alaska Air reported earnings per share of $2.55, surpassing the Zacks Consensus Estimate of $2.36. While earnings declined by 15% year-over-year, operating revenues reached $2.89 billion, falling short of the Zacks Consensus Estimate of $2.94 billion. The company’s passenger revenues, representing 91.5% of total revenue, increased by 2% due to continued recovery in air travel demand, reaching $2.651 billion in the quarter.
Passenger demand growth was evident in the company’s consolidated traffic, measured in revenue passenger miles, which climbed by 2% to 15.30 billion. To meet this heightened demand, Alaska Air expanded its capacity by 6% to 18.19 billion average seat miles. Despite the traffic growth, the consolidated load factor, which reflects the percentage of seat occupancy, decreased by 2.9 percentage points to 84.1% as capacity expansion outpaced traffic growth.
In terms of liquidity, Alaska Air held $1.115 billion in cash and marketable securities as of June 30, 2024, a decrease from the previous quarter’s $2.278 billion. The company’s long-term debt (net of current portion) stood at $2.313 billion, slightly higher than the first quarter’s $2.264 billion. The debt-to-capitalization ratio was 45%. During the quarter, Alaska Air repurchased nearly 663,177 shares for a total of $28 million.
Looking ahead, Alaska Air anticipates third-quarter 2024 earnings per share to range between $1.40 and $1.60. The company projects an economic fuel cost per gallon between $2.85 and $2.95 for the same period. Alaska Air expects available seat miles to increase by 2-3% in the third quarter of 2024 compared to the same period last year. While the company expects cost per available seat mile to rise in the high single digits, it anticipates revenue per available seat mile to remain flat or slightly positive.
For the full year 2024, Alaska Air has adjusted its earnings per share forecast to $3.50-$4.50, down from the previous projection of $3.25-$5.25. The company now expects capacity growth to be less than 2.5% for the year, compared to the previous target of less than 3%. Capital expenditures are projected to fall between $1.2 billion and $1.3 billion, and the full-year tax rate is estimated to be around 25%.
In conclusion, although Alaska Air reported a beat in the second quarter, analysts have been revising estimates downward for the upcoming quarter. Despite the recent downward trend in the stock price, the company’s strong value score indicates potential for growth. Investors should closely monitor Alaska Air’s upcoming earnings release and any further adjustments to its guidance to gain a more comprehensive understanding of the company’s future prospects.
