Will Passenger Revenues Aid Alaska Air's (ALK) Q4 Earnings?
Zacks Investment Research | Jan 17, 2019 10:59PM ET
Alaska Air Group (NYSE:ALK) is scheduled to release its fourth-quarter 2018 results on Jan 24, before market opens.
In the third quarter of 2018, the company delivered a positive earnings surprise of 6.1%. However, the bottom line decreased on a year-over-year basis, mainly due to high fuel costs. Revenues exceeded the Zacks Consensus Estimate and improved on a year-over-year basis owing to robust passenger revenues.
Things are looking up for the company this earnings season too. The Zacks Consensus Estimate for fourth-quarter earnings has moved 69.8% north over the past 60 days. The significant upward revision highlights the positivity surrounding the stock.
Factors Likely to Influence Q4 Results
We expect upbeat passenger revenues to boost the company’s top line in the soon-to-be-reported quarter. Robust traffic during the Thanksgiving holiday period should boost results. Favorable pricing may also drive the top line. The Zacks Consensus Estimate for the metric is pegged at 12.62 cents.
The carrier anticipates fourth-quarter revenue per available seat mile (RASM) of 12.82-12.84 cents. The RASM guidance implies approximately 5.1% year-over-year increase. The Zacks Consensus Estimate for yield (mainline) is pegged at 13.25 cents, higher than 13.18 cents reported in the last reported quarter.
Moreover, fuel costs are expected to be less of a hindrance in the fourth quarter than in the previous quarters owing to nearly 40% decline in oil prices during the October-December period . The company expects fuel costs per gallon to be $2.35 in the soon to-be-reported quarter. The Zacks Consensus Estimate for the metric is pegged at $2.40 per gallon. Reduced tax rates are also anticipated to boost the bottom line in the final quarter of 2018.
However, capacity-related woes are worrisome. In fact, load factor (% of seats filled with passengers) has not increased in any of the three months of the fourth quarter. Capacity overexpansion is the primary reason behind the unimpressive performance of this key metric.
Alaska Air Group, Inc. Price and EPS Surprise
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