Alaska Air Group (ALK) Beats on Q1 Earnings, Misses Sales

Alaska Air Group ALK, which acquired Virgin America in December last year, reported mixed results in the first quarter of 2017. The carrier’s earnings of $1.05 per share beat the Zacks Consensus Estimate by a penny. However, the bottom line contracted 27.6% on a year-over-year basis due to higher costs.

Revenues came in at $1,749 million, which fell short of the Zacks Consensus Estimate of $1,782.7 million. The top line grew 29.8% on a year-over-year basis. Passenger revenues, that improved 31% on a year-over-year basis, accounted for bulk of the top line.

The results failed to find favor with the investors. Consequently, the stock was down in pre-market trading.

Operating Statistics

Airline traffic, measured in revenue passenger miles, rose 36.6% year over year to 11,708 million in the first quarter of 2017. Capacity or available seat miles increased 37.7% to 14,394 million. Load factor (percentage of seats filled by passengers) decreased 70 basis points to 81.3%, owing to traffic growth being outpaced by capacity expansion.

Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) decreased 4.9% year over year to 10.31 cents. While total revenue per available seat mile (RASM) declined 5.7% to 12.15 cents in the reported quarter, yield declined 4.1% to 12.68 cents.

Operating Expenses & Income

In the quarter under review, total operating expenses (on a reported basis) rose 50% year over year to $1,583 million primarily due to the 33% rise in wages and benefits. Operating income declined 43% to $166 million from the prior-year quarter. Fuel price (economic) was $1.78 per gallon, up 38%. Consolidated unit cost or cost per available seat mile – excluding fuel and special items – decreased 1.6% to 8.37 cents.

Alaska Air Group, Inc. Price, Consensus and EPS Surprise

 

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

Liquidity

At the end of the quarter, this Zacks Rank #3 (Hold) company had $1,710 million in cash and marketable securities compared with $1,580 million at the end of 2016. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alaska Air Group exited the year with long-term debt of $2,531 million compared with $2,645 million at the end of 2016. At the end of the quarter, adjusted debt-to-capitalization ratio was 58% compared with 59% at 2016-end. In fact, the carrier paid a dividend of 30 cents per share in the first quarter, up 9% year over year.

Other Important Releases Coming Up

Investors interested in the airline space keenly await the first-quarter earnings reports of SkyWest, Inc. SKYW, Spirit Airlines SAVE and Copa Holdings CPA, slated to be released on Apr 27, Apr 28 and May 10, respectively.

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