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Here's Why Alaska Air (ALK) Shares Have Lost 22.8% in a Year

Zacks Equity Research
·3 min read

Alaska Air Group’s ALK shares have lost 22.8% of value in the past year compared with the industry’s 26.8% decline.

Reasons for Plunge

The coronavirus outbreak is taking a significant toll on Alaska Air. The carrier is suffering significant loss of passenger revenues, which plunged 61% year over year in the first nine months of 2020. Decline in passenger revenues is hurting the bottom line. Notably, the carrier incurred losses in each of the first three quarters of 2020.

To compensate for the tepid demand scenario, the carrier reduced 25.5% capacity in the first nine months of 2020. The airline anticipates December as well as fourth-quarter 2020 capacity to be down approximately 40% year over year.

Increasing debt-to-capitalization ratio at Alaska Air is also not favorable. A higher ratio result indicates that a company is more highly leveraged, which carries a higher risk of insolvency. Inclusive of operating leases, debt-to-capitalization ratio was 59% at the end of the third quarter compared with 41% at the end of December 2019.

Amid the coronavirus concerns, low fuel costs are a boon to Alaska Air as fuel expenses comprise a major chunk of airline expenditures. Notably, fuel prices declined 24.3% year over year in the first nine months of 2020. The savings on fuel costs are supporting the bottom line and offsetting the adversities to some extent.

Unfavorable Estimate Revisions

The Zacks Consensus Estimate for current-year bottom-line widened from a loss of $9.47 to a loss of $10.24 per share in the past 60 days.

Zacks Rank & Stocks to Consider

Alaska Air currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. KNX, Landstar System, Inc. LSTR and Herc Holdings Inc. HRI. Landstar and Knight-Swift carry a Zacks Rank #2 (Buy), while Herc Holdings sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for Knight-Swift, Landstar and Herc Holdings is pegged at 15%, 12% and 12.6%, respectively.

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KnightSwift Transportation Holdings Inc. (KNX) : Free Stock Analysis Report
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Herc Holdings Inc. (HRI) : Free Stock Analysis Report
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Zacks Investment Research