Alaska Airlines Posts Moderate Improvement In The Fourth Quarter
Alaska Airlines (NYSE:ALK) Alaska Airlines in the fourth quarter saw revenues rise by $6.2%, and EPS came in at $0.75, up 5.6% from last year, with revenues coming in at $2.06 billion for the quarter. Revenue per available seat mile rose by 5.2% yoy for the quarter, coming in more or less with analyst consensus. Alaska has started to see signs of a turnaround that was expected, with management taking key steps throughout the year to get back to previous years’ profitability levels. This year the fall in profitability was mostly as a result of the Virgin acquisition, that weighed down earnings throughout the year.
We currently have a price estimate of $70 per share, which is 9% higher than the market price. You can use our interactive dashboard Alaska Q4 Results to modify key drivers and visualize the impact on ALK’s price estimate.
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Alaska’s key takeaway for the year, and quarter, was that it cut down on routes that were not profitable, and continued improving services on its mainline routes, where Revenue Per Availlable Seat Mile (RASM) increased by a much larger 10% versus an overall RASM fall for the year. This trend of slow RASM growth meant that Alaska saw available seat miles grow at a much slower pace. We believe available seat miles will pick up in the coming year as management sees operations back on track. Load factor continues to be an issue with an average of 83% for the year. This has meant as Alaska continues to see headwinds from competition, it risks issues of the load factor being below where the airline would like it to be. Having said that, with the integration of Virgin more or less complete, this metric should see increases in the forthcoming year.
Going forward, Alaska will continue to grow at a similar pace, and with the stock trading relatively cheaply, in comparison to its peers, therefore it may have some upside from current levels. Continued performance will be key in the coming quarters, combined with management’s ability to continue to execute the turnaround.
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