Alaska Air Group, Inc. ALK delivered fourth-quarter 2018 earnings per share (excluding 56 cents from non-recurring items) of 75 cents, surpassing the Zacks Consensus Estimate of 73 cents.
Revenues came in at $2,064 million, above the Zacks Consensus Estimate of $2057.3 million. The top line also rose year over year. Passenger revenues, accounting for a bulk (92.4%) of the top line, were up 6% on a year-over-year basis.
Airline traffic, measured in revenue passenger miles, inched up 1% year over year in the reported quarter. Capacity or available seat miles expanded 1.1%. Load factor (percentage of seats occupied by passengers) contracted 10 basis points to 83.3% as capacity expansion outweighed traffic growth in the reported quarter.
Total revenue per available seat mile (RASM: a key measure of unit revenues) increased 5.2% year over year to 12.84 cents in the quarter under discussion. Meanwhile, yield augmented 5.2% to 14.24 cents.
Alaska Air Group, Inc. Price, Consensus and EPS Surprise
Alaska Air Group, Inc. Price, Consensus and EPS Surprise | Alaska Air Group, Inc. Quote
Operating Expenses & Income
In the quarter under review, total operating expenses were up 12% year over year to $2,018 million. Operating income plunged 66% from the prior-year quarter to $46 million. Fuel price (economic) was $2.35 per gallon, up 17.5%.
Consolidated cost per available seat mile — excluding fuel and special items — nudged up 3.1% to 8.95 cents.
The company has announced a dividend hike of 9% to 35 cents per share (annually: $1.40 per share) from the previous 32 cents. The amount is payable Mar 7, 2019 to shareholders of record as of Feb 19. This marks the company’s sixth dividend hike since its initiation of quarterly dividends in 2013.
Liquidity & Buybacks
At the end of the reported quarter, this Zacks Rank #2 (Buy) company had $1,236 million in cash and marketable securities compared with $1,621 million at the end of 2017.
Alaska Air Group exited the quarter with long-term debt of $1,617 million compared with $2,262 million at the end of 2017. Adjusted debt-to-capitalization ratio was 47% as compared to 53% at 2017 end. Moreover, the carrier repurchased 776,186 shares for approximately $50 million in 2018.
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For the first quarter of 2019, the carrier expects cost per available seat mile (CASM) excluding fuel and special items to rise roughly 4.5-5% year over year. This downside is due to additional costs related to aircraft maintenance among other factors. The dismal cost scenario perhaps played in the minds of investors, causing shares to decline more than 3% in after-hours trading on Jan 24.
For 2019, CASM excluding fuel and special items is projected to climb in the band of 2-2.5%. Economic fuel cost per gallon is anticipated to be $2.05 in the first quarter, down approximately 4%. RASM is projected to improve between 2.5% and 4.5% during the January-March period.
Meanwhile, capacity is projected to inch up around 1.2% in the first quarter while the same is estimated to rise nearly 2% for the full year. In 2020, the metric is anticipated to increase in the 3-4% range. Also, capital expenditures are predicted to total $750 million, each in 2019 and 2020. This is comparable with capex of $960 million in 2018.
Investors interested in the broader Transportation sector are keenly awaiting fourth-quarter earnings reports from key players like SkyWest, Inc. SKYW, C.H. Robinson Worldwide, Inc. CHRW and United Parcel Service, Inc. UPS. While SkyWest and UPS will report fourth-quarter earnings on Jan 31, C.H. Robinson will release the same on Jan 29.
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