Alaska Air (NYSE: ALK) not too long ago reported its Q1 outcomes, with prime line and backside line exceeding the road estimates. The corporate reported income of $2.23 billion and an adjusted loss per share of $0.92, in comparison with the consensus estimates of $2.18 billion in gross sales and loss per share of $1.09. Higher load issue and yields aided the corporate’s general efficiency. On this notice, we talk about Alaska Air’s inventory efficiency, key takeaways from its latest outcomes, and valuation.
Firstly, its inventory efficiency, ALK inventory has seen little change, transferring barely from ranges of $50 in early January 2021 to round $45 now, vs. a rise of about 30% for the S&P 500 over this roughly three-year interval. ALK has had a poor run, with the inventory shedding worth in every of the final 3 years. Returns for the inventory had been 0% in 2021, -18% in 2022, and -9% in 2023. Compared, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that ALK underperformed the S&P in 2021 and 2023.
The truth is, constantly beating the S&P 500 — in good occasions and unhealthy — has been troublesome over latest years for particular person shares; for heavyweights within the Industrials sector together with CAT, GE, and UNP, and even for the megacap stars GOOG, TSLA, and MSFT. In distinction, the Trefis High Quality (HQ) Portfolio, with a group of 30 shares, has outperformed the S&P 500 every year over the identical interval. Why is that? As a bunch, HQ Portfolio shares offered higher returns with much less threat versus the benchmark index; much less of a roller-coaster experience, as evident in HQ Portfolio performance metrics.
Given the present unsure macroeconomic atmosphere with excessive oil costs and elevated rates of interest, may ALK face an analogous scenario because it did in 2021 and 2023 and underperform the S&P over the subsequent 12 months — or will it see a robust soar? From a valuation perspective, ALK inventory seems engaging and can probably see greater ranges over time. We estimate Alaska Air’s Valuation to be $56 per share, reflecting over 20% upside from its present ranges of $45. Our forecast is predicated on a 12x P/E a number of for ALK and anticipated earnings of $4.53 on a per-share and adjusted foundation for the complete 12 months 2024. The corporate expects its 2024 earnings to be within the vary of $3.25 and $5.25.
Wanting on the newest quarter, Alaska Air’s income of $2.2 billion was up 2% y-o-y. Whereas the corporate reported a 2% fall in accessible seat miles, its load issue was up 150 bps, and yield additionally rose 1%, bolstering the general top-line enlargement. The corporate noticed its consolidated adjusted pre-tax margin plunge to -7% from -5.2% within the prior-year quarter. The margin contraction resulted in a internet loss widening to $0.92 per-share, in comparison with $0.62 loss per share within the prior-year quarter.
Alaska Air’s profitability was weighed down as a result of grounding of Boeing 737 MAX plane earlier this 12 months. There was an incident by which the cabin facet panel indifferent midair on Alaska Air (Boeing 737 Max 9) flight 1282 on January 9, 2024. Following the incident, the Federal Aviation Administration grounded Boeing 737 Max 9 plane. The corporate inspected its fleet and the plane returned to service in February. It ought to be famous that Boeing paid $162 million to Alaska Air in preliminary money compensation for the monetary affect on Alaska Air as a result of grounding of Boeing’s 737 MAX airplanes.
General, Alaska’s efficiency in Q1 was higher than expectations, and it has raised its earnings outlook for the full-year. Regardless of its over 15% rise this 12 months, we expect ALK inventory has extra room for progress from right here.
Whereas ALK inventory seems undervalued, it’s useful to see how Alaska Air’s Friends fare on metrics that matter. You’ll find different useful comparisons for corporations throughout industries at Peer Comparisons.
| Returns | Apr 2024 MTD [1] |
2024 YTD [1] |
2017-24 Complete [2] |
| ALK Return | 5% | 15% | -49% |
| S&P 500 Return | -5% | 4% | 122% |
| Trefis Bolstered Worth Portfolio | -8% | -2% | 598% |
[1] Returns as of 4/20/2024
[2] Cumulative complete returns because the finish of 2016
Make investments with Trefis Market-Beating Portfolios
See all Trefis Price Estimates
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
