Shares of Alaska Air Group (ALK) fell in trading after the company’s third-quarter outlook fell short of estimates. The company, a major U.S. airline, lowered its FY24 guidance for earnings to be in the range of $3.50 to $4.50 per share from its prior guidance of $3.25 to $5.25 per share, below the consensus estimate of $4.52. In the third quarter, the airline has projected earnings between $1.40 and $1.60 per share, which was short of analysts’ expectations of $2.06 per share.
The lower-than-expected outlook was due to the financial impact of its newly signed agreement with flight attendants and the “moderating domestic revenue environment,” referring to softer growth or reduced profitability in its U.S. operations. Alaska Air has signed a new tentative agreement with the union that will result in its flight attendants receiving an average pay hike of 32%, potentially increasing operating costs in the near term.
ALK’s Q2 Results
Alaska Air reported adjusted Q2 earnings of $2.55 per share, beating analysts’ consensus estimate of $2.38 per share.
The airline reported operating revenues of $2.89 billion, a 2% increase year-over-year, which fell short of analysts’ expectations of $2.94 billion. The company’s revenues were impacted by a $60 million reduction in April bookings, potentially due to its plane being involved in January’s mid-air cabin blowout.
However, the company’s operating costs per available seat mile (per unit operating costs) declined by 2% year-over-year to 9.89 cents in the second quarter.
Furthermore, the airline received nine Boeing (BA) 737 MAX aircraft, including six 737 MAX 9 variants, during the second quarter.
Is ALK a Good Stock to Buy Now?
Analysts remain bullish about ALK stock, with a Strong Buy consensus rating based on five Buys and one Hold. Over the past year, ALK has declined by more than 20%, and the average ALK price target of $55.83 implies an upside potential of 39.5% from current levels. These analyst ratings are likely to change following ALK’s Q2 results today.
