Alaska Air Group Inc’s (NYSE:ALK) Earnings Grew 27.03%, Did It Beat Long-Term Trend?
In this commentary, I will examine Alaska Air Group Inc’s (NYSE:ALK) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the airlines industry performed. As an investor, I find it beneficial to assess ALK’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Alaska Air Group
Were ALK’s earnings stronger than its past performances and the industry?
For the purpose of this commentary, I like to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to assess different stocks on a similar basis, using the latest information. For Alaska Air Group, its most recent trailing-twelve-month earnings is US$1.03B, which compared to the prior year’s level, has increased by 27.03%. Since these figures are fairly short-term, I’ve computed an annualized five-year value for ALK’s net income, which stands at US$581.88M This means on average, Alaska Air Group has been able to steadily raise its net income over the last couple of years as well.
How has it been able to do this? Let’s take a look at if it is solely attributable to an industry uplift, or if Alaska Air Group has seen some company-specific growth. Over the past few years, Alaska Air Group expanded its bottom line faster than revenue by effectively controlling its costs. This brought about a margin expansion and profitability over time. Inspecting growth from a sector-level, the US airlines industry has been growing its average earnings by double-digit 15.31% over the prior year, and 16.82% over the past half a decade. This suggests that whatever tailwind the industry is benefiting from, Alaska Air Group is able to amplify this to its advantage.
What does this mean?
Though Alaska Air Group’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Alaska Air Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ALK’s future growth? Take a look at our free research report of analyst consensus for ALK’s outlook.
Financial Health: Is ALK’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
