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Alaska Air Group (ALK) Mired in Headwinds: Time to Dump?
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Akin to other U.S. airlines, Alaska Air Group (ALK - Free Report) , the parent company of Alaska Airlines, is hit hard by high fuel costs as oil price shoots up. Oil price is moving north primarily because of Russia's invasion of Ukraine, which emanates concerns over oil supplies from Russia, one of the world's largest producers of the commodity. Such escalation in oil price does not bode well for airlines’ bottom line as fuel expenses represent one of the largest input costs for these operators.
Due to high oil price, Alaska Air raised its fuel cost per gallon view for the first quarter of 2022. The carrier expects first-quarter economic fuel cost to be $2.62 per gallon compared with the initial estimate of $2.45-$2.50. The carrier also narrowed its guidance with respect to capacity for the March quarter. ALK now expects capacity to decline approximately 11-12% from the first-quarter 2019 reported number. The same is compared with the previous expectation of a 10-13% decrease.
Due to the unfavorable capacity guidance, the estimate for first-quarter non-fuel unit costs is revised upward. The metric is now forecast to increase 18-19% in the first quarter from the comparable period’s level in 2019 (previous expectation: increase of 15-18%).
The Zacks Consensus Estimate for first-quarter loss has widened to $1.64 from 57 cents, 60 days ago. Mainly due to escalating fuel costs per gallon, shares of ALK have declined 5% in the past six months.
Image Source: Zacks Investment Research
Moreover, the Momentum Style Sore of C currently carried by Alaska Air, highlights its short-term unattractiveness. That the ALK stock may struggle going forward is also highlighted by the Zacks Consensus Estimate for current-year earnings being revised 36.32% downward over the past 60 days.
In light of the above-mentioned negatives, we believe, investors should steer clear of the Alaska Air stock for now. Its current Zacks Rank #5 (Strong Sell) also underpins the same.
Some better-ranked stocks within the broader Transportation sector are as follows:
USA Truck presently sports a Zacks Rank #1 (Strong Buy). USAK’s earnings surpassed the Zacks Consensus Estimate in three of the preceding four quarters (in line in one), the average surprise being 64.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of USA Truck have rallied more than 44% in the past six months. Improvement in the freight market conditions is aiding the USAK stock immensely.
GATX Corporation (GATX - Free Report) currently carries a Zacks Rank #2 (Buy). GATX has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 27.7%.
Shares of GATX have appreciated more than 38% in the past six months. We are impressed with GATX’s efforts to reward its shareholders through dividends and buybacks.
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Alaska Air Group (ALK) Mired in Headwinds: Time to Dump?
Akin to other U.S. airlines, Alaska Air Group (ALK - Free Report) , the parent company of Alaska Airlines, is hit hard by high fuel costs as oil price shoots up. Oil price is moving north primarily because of Russia's invasion of Ukraine, which emanates concerns over oil supplies from Russia, one of the world's largest producers of the commodity. Such escalation in oil price does not bode well for airlines’ bottom line as fuel expenses represent one of the largest input costs for these operators.
Due to high oil price, Alaska Air raised its fuel cost per gallon view for the first quarter of 2022. The carrier expects first-quarter economic fuel cost to be $2.62 per gallon compared with the initial estimate of $2.45-$2.50. The carrier also narrowed its guidance with respect to capacity for the March quarter. ALK now expects capacity to decline approximately 11-12% from the first-quarter 2019 reported number. The same is compared with the previous expectation of a 10-13% decrease.
Due to the unfavorable capacity guidance, the estimate for first-quarter non-fuel unit costs is revised upward. The metric is now forecast to increase 18-19% in the first quarter from the comparable period’s level in 2019 (previous expectation: increase of 15-18%).
The Zacks Consensus Estimate for first-quarter loss has widened to $1.64 from 57 cents, 60 days ago. Mainly due to escalating fuel costs per gallon, shares of ALK have declined 5% in the past six months.
Image Source: Zacks Investment Research
Moreover, the Momentum Style Sore of C currently carried by Alaska Air, highlights its short-term unattractiveness. That the ALK stock may struggle going forward is also highlighted by the Zacks Consensus Estimate for current-year earnings being revised 36.32% downward over the past 60 days.
In light of the above-mentioned negatives, we believe, investors should steer clear of the Alaska Air stock for now. Its current Zacks Rank #5 (Strong Sell) also underpins the same.
Some better-ranked stocks within the broader Transportation sector are as follows:
USA Truck presently sports a Zacks Rank #1 (Strong Buy). USAK’s earnings surpassed the Zacks Consensus Estimate in three of the preceding four quarters (in line in one), the average surprise being 64.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of USA Truck have rallied more than 44% in the past six months. Improvement in the freight market conditions is aiding the USAK stock immensely.
GATX Corporation (GATX - Free Report) currently carries a Zacks Rank #2 (Buy). GATX has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 27.7%.
Shares of GATX have appreciated more than 38% in the past six months. We are impressed with GATX’s efforts to reward its shareholders through dividends and buybacks.