We expect Alaska Air Group, Inc. ( ALK) to beat expectations when it reports its second-quarter 2014 results before the market opens on Jul 24, 2014.
Why a Likely Positive Surprise?
Our proven model shows that Alaska Air is likely to beat earnings this quarter because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.92%. This is because the Most Accurate estimate is poised at $1.10 whereas the Zacks Consensus Estimate is pegged at $1.10. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: Alaska Air currently has a Zacks Rank #1 (Strong Buy). Note that the stocks with Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. However, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Alaska Air’s Zacks Rank #1 and +0.92% ESP makes us confident of a positive earnings beat.
What is Driving the Better-Than-Expected Earnings?
Despite volatile jet fuel prices, Alaska Air’s strong branding and product differentiation allows it to offer its customers a unique flying experience. Moreover, the company is making continued progress in expanding its product and service offerings on board and on the ground to boost ancillary revenues and enhance ticket pricing flexibility.
Alaska Air is expected to benefit from an improving market scenario in the forthcoming quarter. A sharp drop in the U.S. unemployment rate and the improving pace of job creation bodes well for the U.S. economy. This, in turn, could prove beneficial for the overall airline industry
Other Stocks to Consider
Other companies you may consider on the basis of our model, which have the right combination of elements to post an earnings beat this quarter are as follows:
American Airlines Group Inc. ( AAL) has an earnings ESP of +1.56% and a Zacks Rank #1.
JetBlue Airways Corporation ( JBLU) has an earnings ESP of +5.26 and a Zacks Rank #2.
United Continental Holdings, Inc. ( UAL) has an earnings ESP of +1.37% and a Zacks Rank #2 (Buy).