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Alaska Air (ALK)
NYSE:ALK
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Alaska Air
(NYSE:ALK)77Outperform
Positive Factors
Financial Performance
The 4Q results exceeded expectations by over 70% at the pre-tax line, easing concerns about high targets.
Merger Synergies
The HA merger looks to be a situation where 1 + 1 = 3 and the two franchises are fitting hand in glove.
Negative Factors
Operational Challenges
Hawaiian Airlines assets continue to improve as the airline laps the impact of the Maui wildfires and GTF groundings.
Alaska Air (ALK) vs. S&P 500 (SPY)
Market Cap
$7.46B
Dividend YieldN/A
Average Volume (3M)2.71M
Price to Earnings (P/E)19.9
Beta (1Y)0.69
Revenue Growth12.56%
EPS Growth69.33%
CountryUS
Employees33,941
SectorIndustrials
Sector Strength66
IndustryTransportation
Share Statistics
EPS (TTM)3.05
Shares Outstanding123,078,170
10 Day Avg. Volume2,849,001
30 Day Avg. Volume2,712,241
Financial Highlights & Ratios
PEG Ratio0.29
Price to Book (P/B)N/A
Price to Sales (P/S)0.64
Price to Cash Flow (P/CF)6.80
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$87.58Price Target Upside44.43% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering13
Alaska Air Business Overview & Revenue Model
Company DescriptionAlaska Air Group, Inc. (ALK) is a prominent airline holding company headquartered in SeaTac, Washington. It operates through its subsidiaries, Alaska Airlines and Horizon Air, serving a comprehensive network that spans over 115 destinations across the United States, Mexico, Canada, and Costa Rica. The company is renowned for its focus on customer service, operational efficiency, and a robust route structure, offering a range of services from basic economy to first-class seating. Alaska Air Group is committed to sustainable practices and innovation in its operations, enhancing the overall travel experience for its customers.
How the Company Makes MoneyAlaska Air Group primarily generates revenue through passenger ticket sales, which constitute the largest portion of its earnings. The company offers various fare classes and ancillary services such as baggage fees, seat selection, and in-flight purchases, contributing to additional revenue streams. Cargo services also play a role in the company's revenue model, with Alaska Air providing freight and mail transportation. The company benefits from strategic partnerships and codeshare agreements with other airlines, expanding its network reach and customer base. Additionally, Alaska Air Group capitalizes on its loyalty program, Mileage Plan, which drives customer retention and revenue through partnerships with hotels, car rental agencies, and other travel-related services.
Alaska Air Financial Statement Overview
Summary
Alaska Air has shown considerable improvement across most financial metrics, particularly in revenue growth and profitability. The income statement indicates strong recovery and operational efficiency, while the cash flow statement portrays enhanced cash generation. However, the balance sheet suggests a need for caution concerning leverage and equity levels. Overall, the company is on a positive trajectory, with some areas requiring attention to ensure long-term financial stability.Income Statement
Alaska Air's income statement shows solid recovery with a notable increase in total revenue from $10.43 billion in 2023 to $11.74 billion TTM (Trailing-Twelve-Months). The gross profit margin improved to 43.5% TTM from 23.6% in 2023, indicating better cost management. Net profit margin also rose to 3.4% TTM from 2.3% in 2023, reflecting enhanced profitability. The EBIT margin increased to 6.4% TTM, up from 3.8% in 2023, demonstrating operational efficiency. However, the EBITDA margin stayed relatively stable, suggesting room for further improvement in operational leverage.78
Positive
Balance Sheet
The balance sheet data is incomplete for TTM, but in 2023, the debt-to-equity ratio was approximately 0.93, indicating a moderate level of leverage. The return on equity was 5.7% in 2023, reflecting a reasonable return for shareholders. The equity ratio was 25.9% in 2023, showing a balanced capital structure, though slightly on the lower side, indicating potential vulnerability if leverage persists.65
Positive
Cash Flow
The cash flow statement highlights a significant recovery in free cash flow, from a deficit in 2023 to a positive $182 million TTM. The operating cash flow to net income ratio is robust, suggesting strong cash conversion efficiency. The free cash flow to net income ratio has improved, affirming the company's ability to generate free cash flow despite capital expenditures. However, historical volatility in cash flow points to potential risks in sustaining this momentum.70
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 8.19B | 11.73B | 10.43B | 9.65B | 6.18B | 3.57B | Gross Profit |
| 1.34B | 2.36B | 2.46B | 1.66B | 1.35B | -414.00M | EBIT |
| 420.00M | 570.00M | 394.00M | 338.00M | 341.00M | -1.75B | EBITDA |
| 932.00M | 1.27B | 1.27B | 1.20B | 137.00M | -1.33B | Net Income Common Stockholders |
| 208.00M | 395.00M | 235.00M | 58.00M | 478.00M | -1.31B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 2.48B | 2.48B | 1.80B | 2.42B | 3.12B | 3.35B | Total Assets |
| 19.77B | 19.77B | 15.83B | 14.28B | 13.95B | 14.05B | Total Debt |
| 6.39B | 6.39B | 3.82B | 3.88B | 4.09B | 5.05B | Net Debt |
| 5.19B | 5.19B | 3.54B | 3.54B | 3.62B | 3.68B | Total Liabilities |
| 15.40B | 15.40B | 11.72B | 10.46B | 10.15B | 11.04B | Stockholders Equity |
| 4.37B | 4.37B | 4.11B | 3.82B | 3.80B | 3.00B |
| Cash Flow | Free Cash Flow | ||||
| 436.00M | 183.00M | -444.00M | -253.00M | 738.00M | -440.00M | Operating Cash Flow |
| 1.26B | 1.46B | 1.05B | 1.42B | 1.03B | -234.00M | Investing Cash Flow |
| -659.00M | -634.00M | -964.00M | -1.22B | -1.01B | -593.00M | Financing Cash Flow |
| -839.00M | 119.00M | -147.00M | -325.00M | -914.00M | 1.98B |
Alaska Air Technical Analysis
Negative
60.64
Price Trends
69.73
Negative
61.08
Negative
50.22
Positive
Market Momentum
-1.73
Positive
31.06
Neutral
10.72
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ALK, the sentiment is Negative. The current price of 60.64 is below the 20-day moving average (MA) of 71.35, below the 50-day MA of 69.73, and above the 200-day MA of 50.22, indicating a neutral trend. The MACD of -1.73 indicates Positive momentum. The RSI at 31.06 is Neutral, neither overbought nor oversold. The STOCH value of 10.72 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ALK.
Alaska Air Risk Analysis
Alaska Air disclosed 28 risk factors in its most recent earnings report. Alaska Air reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Alaska Air Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $27.13B | 8.79 | 28.63% | ― | 6.23% | 20.08% | |
77 Outperform | $34.42B | 9.99 | 26.19% | 1.03% | 6.19% | -25.26% | |
77 Outperform | $7.46B | 19.86 | 9.31% | ― | 12.56% | 69.33% | |
63 Neutral | $17.31B | 38.71 | 4.50% | 2.46% | 5.34% | -6.20% | |
62 Neutral | $8.11B | 13.34 | 1.17% | 3.02% | 4.16% | -15.14% | |
58 Neutral | $8.57B | 11.76 | -21.27% | ― | 2.70% | 2.20% | |
47 Neutral | $2.16B | ― | -26.60% | ― | -3.50% | -148.99% |
* Industrials Sector Average
Performance Comparison
ALK
Alaska Air
60.64
23.28
62.31%
DAL
Delta Air Lines
53.28
11.06
26.20%
JBLU
JetBlue Airways
6.11
-0.93
-13.21%
LUV
Southwest Airlines
29.20
-3.99
-12.02%
UAL
United Airlines Holdings
82.88
39.99
93.24%
AAL
American Airlines
13.03
-1.62
-11.06%
Alaska Air Earnings Call Summary
Earnings Call Date: Jan 23, 2025 | % Change Since: -10.03% | Next Earnings Date: Apr 17, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong financial performance, successful acquisition integration of Hawaiian Airlines, and strategic initiatives that exceeded expectations. Despite some challenges with international travel to Hawaii and increased unit costs, the overall performance and outlook remain positive, with significant achievements like record revenue, corporate travel recovery, and major share repurchase programs signaling confidence in future growth.Highlights
Record Revenue in Q4
Achieved a record $3.5 billion in revenue, up nearly 10% year-over-year with unit revenues up 7%.
Strong Full Year Performance
Full year GAAP net income of $395 million and adjusted net income of $625 million, with an adjusted EPS of $4.87, exceeding guidance.
Successful Acquisition Integration
Hawaiian Airlines acquisition completed, contributing positively with better-than-expected Q4 performance.
Significant Share Repurchase Program
$248 million in shares repurchased in December, initiating a new $1 billion share repurchase program.
Improvements in Corporate Travel and Premium Cabins
Corporate travel revenues up 35% in December; First and Premium Class revenues increased by 10% and 11% year-over-year respectively.
Record Employee Bonuses
Record $300 million bonus payout to employees due to strong financial performance.
Seattle Hub Banking Success
Connecting passengers via Seattle up nearly 20% in February.
Lowlights
Legacy Costs and Unit Cost Increase
Fourth quarter unit costs were up 8.6% year-over-year, driven by performance-based pay accruals and other factors.
Challenges with Hawaiian International Travel
International travel to Hawaii continues to face challenges, though modest improvements are noted.
Loss Anticipated in Q1 2025
Expected loss per share of $0.50 to $0.70 in the first quarter of 2025, although legacy Alaska assets are expected to break even.
Company Guidance
In the Q4 2024 earnings call, Alaska Air Group (ALK) provided comprehensive guidance showcasing robust financial performance and strategic initiatives. The company reported a Q4 GAAP net income of $71 million and a full-year income of $395 million, with adjusted figures reaching $125 million and $625 million respectively. ALK exceeded its guidance with an adjusted EPS of $0.97 for Q4 and $4.87 for the entire year, achieving a full-year adjusted pretax margin of 7.1%. The quarter saw $3.5 billion in revenue, a 10% increase year-over-year, and a remarkable $248 million in share repurchases in December, culminating in over $300 million for the year. Looking ahead to 2025, ALK expects EPS to surpass $5.75 and aims to unlock $1 billion in incremental pretax profit over the next three years through commercial initiatives and at least $500 million in synergies. The guidance reflects a strategic focus on integrating Hawaiian Airlines, optimizing network synergies, and expanding international routes, with a projected capacity growth of 2%-3% and positive momentum in both legacy Alaska and Hawaiian operations.Alaska Air Corporate Events
M&A TransactionsBusiness Operations and StrategyFinancial Disclosures
Alaska Air Reports Record Financial Results for 2024
Positive
Jan 22, 2025
On January 22, 2025, Alaska Air Group reported record financial results for the fourth quarter and full year 2024, with $11.7 billion in revenue despite challenges such as the acquisition of Hawaiian Airlines and fleet grounding. The company achieved a 7.1% adjusted pretax margin, amongst the highest in the industry, and announced significant employee incentive payouts. Alaska Air’s strategic plan, ‘Alaska Accelerate,’ aims to leverage its expanded network and enhance customer experience to deliver $1 billion in incremental profit over the next three years.
M&A TransactionsBusiness Operations and Strategy
Alaska Air Unveils Ambitious Growth Plans Post-Merger
Positive
Dec 10, 2024
Alaska Air Group’s Investor Day revealed ambitious plans following its merger with Hawaiian Airlines, aiming for $1 billion in additional profit and a minimum EPS of $10 by 2027. The company plans to expand its network with new flights from Seattle to Tokyo and Seoul, while also enhancing its premium offerings and launching a new credit card. Alaska’s strategy focuses on significant value creation and competitive advantages, anticipating substantial revenue growth and improved financial targets.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.