Alaska Air's (ALK) Q3 Earnings Beat, Revenues Surge Y/Y
Alaska Air Group’s ALK third-quarter 2021 earnings (excluding 6 cents from non-recurring items) of $1.47 per share surpassed the Zacks Consensus Estimate of $1.29. In the year-ago period, the company incurred a loss of $3.23. Results reflect the recovery in air-travel demand.
Operating revenues of $1,953 million outperformed the Zacks Consensus Estimate of $1,932 million. The top line surged more than 100% year over year with passenger revenues, accounting for 90.8% of the top line, soaring over 200%, thanks to improvement in air-travel demand from the pandemic-led lows. Passenger revenues totaled $1,774 million in the reported quarter. On a year-over-year basis, cargo and other revenues surged 31% to $59 million. Mileage plan other revenues accounted for the balance.
With air-travel demand continuing to be below the pre-pandemic levels, the top line declined 18% from the third quarter of 2019 with passenger revenues falling 20%.
Alaska Air Group, Inc. Price, Consensus and EPS Surprise
Alaska Air Group, Inc. price-consensus-eps-surprise-chart | Alaska Air Group, Inc. Quote
Total revenue per available seat mile (RASM: a key measure of unit revenues) jumped 52.1% year over year to 13.54 cents in the reported quarter. Yield inched up 2.1% to 15.3 cents.
Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) soared more than 200% to 11.59 billion. To cater to this increased demand, capacity (measured in average seat miles) expanded 83.3% to 14.43 billion. Consolidated load factor (percentage of seats filled by passengers) increased 31.8 percentage points to 80.3% in the third quarter.
In the third quarter, total operating expenses (on a reported basis) escalated 33% year over year to $1,695 million with aircraft fuel expenses, including hedging gains and losses, skyrocketing more than 200%. Economic fuel price per gallon climbed 55.3% to $2.05, due to spike in oil prices. However, consolidated operating costs per available seat mile (CASM: excluding fuel and special items) declined 39.1% to 8.45 cents.
Liquidity
As of Sep 30, 2021, Alaska Air, carrying a Zacks Rank #4 (Sell), had $3,195 million in cash and marketable securities compared with $3,346 million at the end of 2020.
The company exited the third quarter with long-term debt (net of current portion) of $2,225 million compared with $2,357 million at the end of December 2020. Inclusive of operating leases, debt-to-capitalization ratio was 51% compared with 61% at the end of December 2020.
Q4 Outlook
For the fourth quarter, Alaska Air expects capacity to decline approximately 13-16% from the comparable period in 2019. Revenue passengers are anticipated to fall 16-19% from the 2019 level. Passenger load factor is estimated in the range of 77-80%. Total revenues are forecast to drop around 16-19% from the 2019 level. CASM, excluding fuel and special items, is predicted to rise 7-9% from the fourth quarter of 2019. The company estimates economic fuel cost per gallon in the band of $2.2-$2.30.
Sectorial Snapshot
Within the broader Transportation sector, Delta Air Lines DAL, J.B. Hunt Transport Services JBHT and Kansas City Southern KSU recently reported third-quarter 2021 results.
Delta, carrying a Zacks Rank #4 (Sell), reported third-quarter earnings (excluding $1.59 from non-recurring items) of 30 cents per share, outpacing the Zacks Consensus Estimate of 15 cents. Revenues of $9,154 million also beat Zacks Consensus Estimate of $8,370.6 million.
J.B. Hunt, carrying a Zacks Rank #2 (Buy), reported third-quarter earnings of $1.88 per share, surpassing the Zacks Consensus Estimate of $1.77. Total operating revenues of $3144.8 million outperformed the Zacks Consensus Estimate of $3002.1 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kansas City Southern, carrying a Zacks Rank #5 (Strong Sell), reported third-quarter earnings (excluding 31 cents from non-recurring items) of $2.02 per share, missing the Zacks Consensus Estimate of $2.07. Quarterly revenues of $744 million, however, surpassed the Zacks Consensus Estimate of $725.9 million.
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