Here's Why Investors Should Buy Alaska Air (ALK) Stock Now
Alaska Air Group, Inc. ALK is currently benefitting from an uptick in air-travel demand.
Solid Rank & VGM Score: Alaska Air currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. Thus, ALK seems an appropriate investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Northward Estimate Revisions: Seven estimates for 2022 have moved upward in the past 60 days, indicative of analysts’ confidence in the stock. The Zacks Consensus Estimate for 2022 earnings has moved 38% north in the past 60 days.
Positive Earnings Surprise History: Alaska Air has a stellar earnings surprise history. Earnings outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average being 18.5%.
Strong Prospects: The Zacks Consensus Estimate for 2022 earnings is pegged at $3.92, which indicates growth of 292% from the year-ago reported figure. Moreover, earnings are expected to estimate 65.6% growth in 2023.
Driving Factors: Buoyed by the uptick in air-travel demand from the 2020 levels, consolidated traffic (measured in revenue passenger miles) soared 96.3% year over year to 10.59 billion in the March quarter. 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.
Improvement in air-travel demand bodes well for ALK. Following a softness in bookings in January due to Omicron-induced woes, the carrier has been seeing demand trending above the 2019 levels. It is seeing a continuous improvement in both leisure (100% recovery from the 2019 level) and business travel (70% recovery) demand. For the second quarter, total revenues are expected to increase 5-8% on capacity. This is likely to result in double-digit yields, improved unit revenues and a healthy pre-tax margin in the quarter. Alaska Air expects to reap profits from the second quarter onward through 2022. For the full year, the airline expects pre-tax margin of 6-9%.
Other Stocks to Consider
Investors interested in the Zacks Transportation sector can also consider stocks like Ryder System, Inc. R, C.H. Robinson Worldwide, Inc. CHRW and GATX Corporation GATX.
Ryder has a trailing four-quarter surprise of 48.2%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters. R is benefiting from improving economic and freight conditions in the United States. Revenues in all segments grew (on higher rental revenues, new business and favorable pricing) in first-quarter 2022.
R currently sports a Zacks Rank of 1.
The expected long-term earnings per share (EPS) (three-to-five years) growth rate for C.H. Robinson is pegged at 9%. Improving freight market conditions are aiding CHRW. In first-quarter 2022, the top line improved 41.8% owing to favorable truckload pricing for customers and handsome profits in ocean freight.
Driven by the positives, the stock has rallied 8.6% in the past year. CHRW currently sports a Zacks Rank of 1.
GATX has a trailing-four quarter surprise of 40.1%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters. The gradual improvement in the North American railcar leasing market is a huge positive for GATX.
Driven by the upsides, the stock has risen 8.9% in the past year. GATX currently sports a Zacks Rank #1.
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Ryder System, Inc. (R) : Free Stock Analysis Report
C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
GATX Corporation (GATX) : Free Stock Analysis Report
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