On Friday, BofA Securities updated its outlook on Alaska Air Group Inc. (NYSE:ALK) shares, increasing the price target to $56 from the previous $50 while maintaining a Buy rating on the stock.
The airline has provided guidance for its second-quarter 2024 earnings per share (EPS) to be between $2.20 and $2.40. This projection is notably higher than BofA Securities' initial forecast of $2.23 and surpasses the consensus estimate of $2.16 from other analysts.
The positive adjustment stems from the airline's robust close-in and corporate demand, which has been strong enough to counterbalance the impact of rising fuel costs. Despite the higher expenses, the demand trends are favorable, and there is a possibility that the actual performance could exceed the guided range.
Alaska Air's expected capacity growth of 5-7% suggests a decrease in unit revenue growth to -2.5%, which contrasts with the +5% core unit revenue growth seen in the first quarter of 2024.
The revised estimates by BofA Securities for the second quarter of 2024 now include a capacity growth assumption of 6%, unit revenues declining by 2.5%, and unit costs increasing by 1.8%. The anticipated cost pressures are primarily attributed to labor expenses, exacerbated by constraints in growth due to ongoing challenges with Boeing (NYSE:BA) aircraft deliveries.
The airline's outlook, as described by the analyst, reflects a solid performance despite the industry-wide challenges, particularly with fuel prices and aircraft supply.
InvestingPro Insights
Alaska Air Group Inc. (NYSE:ALK) has shown a robust performance in the face of industry challenges, and the latest data from InvestingPro underscores the positive sentiment. With a market capitalization of $5.59 billion and an adjusted price-to-earnings (P/E) ratio of 10.38, the company stands out with a PEG ratio of just 0.07, indicating potential for growth at a value. Moreover, the airline has demonstrated strong returns, with a 7.6% increase over the past week, 17.5% over the last month, and an impressive 27.55% over the last three months.
InvestingPro Tips highlight that net income is expected to grow this year, with six analysts having revised their earnings upwards for the upcoming period. This aligns with the company's recent guidance for higher-than-anticipated earnings per share in the second quarter of 2024. Furthermore, Alaska Air's solid performance is reflected in the 38.18% price uptick over the last six months, which is notable amidst the current economic conditions.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available, which can be accessed through the dedicated InvestingPro platform. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With these insights, investors can gain a clearer understanding of Alaska Air's financial health and market position.
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