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Alaska Air (ALK) Q1 Loss Narrower Than Expected, Revenues Beat

Alaska Air Group ALK incurred a loss (excluding 19 cents from non-recurring items) of $1.33 per share in the first quarter of 2022, narrower than the Zacks Consensus Estimate of a loss of $1.58. In the year-ago period, ALK had incurred a loss of $3.51.

Operating revenues of $1,681 million outperformed the Zacks Consensus Estimate of $1,669.3 million. The top line surged more than 100% year over year with passenger revenues, accounting for 89.9% of the top line, soaring more than 100% owing to an improvement in air-travel demand from the pandemic-induced lows. Passenger revenues totaled $1,511 million in the reported quarter. On a year-over-year basis, cargo and other revenues rose 32% to $58 million. Mileage plan other revenues accounted for the balance.

However, with air-travel demand continuing to be below the pre-pandemic levels, the top line declined 10% from the first quarter of 2019, with passenger revenues falling 12%.

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

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

Alaska Air Group, Inc. price-consensus-eps-surprise-chart | Alaska Air Group, Inc. Quote


Total revenue per available seat mile (RASM: a key measure of unit revenues) jumped 59.1% year over year to 12.20 cents. Yield increased 16.8% to 14.27 cents.

Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) soared 96.3% to 10.59 billion. To cater to this increased demand, capacity (measured in average seat miles) expanded 32.6% to 13.78 billion. Consolidated load factor (percentage of seats filled by passengers) increased 24.9 percentage points to 76.8% in the first quarter of 2022.

In the first quarter, total operating expenses (on a reported basis) escalated 97% year over year to $1,883 million with aircraft fuel expenses, including hedging gains and losses, skyrocketing 71%. Economic fuel price per gallon climbed 46.4% to $2.62 due to a spike in oil prices, thanks to the Russia-Ukraine war. However, consolidated operating costs per available seat mile (CASM: excluding fuel and special items) dipped 2.9% year over year to 10.61 cents.

Liquidity

As of Mar 31, 2022, Alaska Air, carrying a Zacks Rank #3 (Hold), had $2.89 billion of cash and marketable securities compared with $3.12 billion at the end of 2021.

ALK exited the first quarter with long-term debt (net of current portion) of $2.08 billion compared with $2.17 billion at the end of December 2021. Debt-to-capitalization ratio was 50% compared with 49% at the end of December 2021.

Q2 & Full-Year Outlook

Alaska Air expects capacity to decline 6-9% in the second quarter from the comparable period in 2019. Revenue passengers are estimated to fall 10-12% in the ongoing quarter from the 2019 level. Passenger load factor is expected to be in the range of 85-88%. Total revenues are forecast to increase 5-8% in the second quarter from the comparable period in 2019. CASM, excluding fuel and special items, is predicted to climb 16-19% in the current quarter from the 2019 level. Economic fuel cost per gallon is estimated to be in the band of $3.25-$3.30 in the second quarter. Adjusted tax rate is expected to be 24-25% in the second quarter.

Due to rising oil prices, among other factors, Alaska Air has reduced capacity expectations for the full year. The company now estimates capacity to either decline up to 3% or remain flat compared with the 2019 level against the previous expectation of an increase of 1-3%. Due to the anticipated reduction in capacity, ALK expects CASM, excluding fuel and special items, to increase 6-8% in 2022 from the 2019 level compared with the previous forecast of a rise of 3-5%. The company continues to expect 2022 adjusted pre-tax margin to be 6-9%.

Sectorial Snapshot

Within the broader Transportation sector, Delta Air Lines DAL and J.B. Hunt Transport Services JBHT recently reported first-quarter 2022 results.

Delta, carrying a Zacks Rank #2 (Buy), incurred a loss (excluding 25 cents from non-recurring items) of $1.23 per share in the first quarter of 2022, narrower than the Zacks Consensus Estimate of a loss of $1.28. With Omicron hampering travel plans in the early part of first-quarter 2022, the carrier incurred a loss after reaping profits in the last two quarters of 2021. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Delta’s first-quarter revenues came in at $9,348 million, which not only beat the Zacks Consensus Estimate of $9,063.5 million but also soared in excess of 100% from the year-ago figure. The uptick in air-travel demand in the United States can be gauged from the fact that 80.5% of first-quarter 2022 passenger revenues came from domestic markets.

J.B. Hunt, carrying a Zacks Rank #3, reported first-quarter 2022 earnings of $2.29 per share, which surpassed the Zacks Consensus Estimate of $1.91. The bottom line surged 67.2% year over year on higher revenues across all segments.

J.B. Hunt’s first-quarter operating revenues of $3,488.6 million also outperformed the Zacks Consensus Estimate of $3,260.5 million. The top line jumped 33.3% year over year. Total operating revenues, excluding fuel surcharges, rose 27.4% year over year.


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