Newsletter Login

Username:

Password:


Need help logging in?

New Subscriber?
Start Here!

Q & A

I mostly follow your recommendations, but I also own two small-cap stocks with 100 Overall scores. Why are they not on one of your buy lists?



Read More from Q&A


Tools & Resources

Stock Spotlight

New Alaska ready to soar

Recent Price
$91
Dividend
$1.20
Yield
1.3%
P/E Ratio
12
Shares (millions)
124
Long-Term Debt as % of Capital
47%
52-Week Price Range
$101.43 - $54.51



Don’t read too much into the name of Alaska Air Group ($90; ALK) — there’s a lot more to the company than flights to and from Alaska.

In the wake of December’s purchase of Virgin America, Alaska Air has become the largest airline on the West Coast, with 286 planes flying more than 1,200 routes a day, reaching about 900 destinations.

Expectations for the combined company are rising, with the per-share-profit consensus for this year up 19% over the last three months, while the 2018 consensus has risen 14%. Despite the higher targets, growth expectations remain reasonable, with analysts projecting profit growth of 9% in both 2017 and 2018. Alaska Air, yielding 1.3%, is a Buy and a Long-Term Buy.

What’s in a name?

Alaska, which purchased Virgin America for $2.6 billion last year, plans to drop the trendy brand by 2019. Not surprisingly, Virgin founder Richard Branson panned the move. But Alaska plans to retain many of the features that made Virgin America so popular and hip — including mood lighting and a wide selection of in-flight entertainment options.

The merger is not without its problems — including concerns about the need to maintain two types of aircraft, Boeing ($181; BA) jets for Alaska’s legacy business and Virgin’s Airbus planes. However, Alaska has announced plans to retrofit many of the Airbus jets to accommodate more first-class and extra-legroom seats, bringing them closer to the model of Alaska’s own planes. In addition, the company is working with employees to preserve elements of both the Virgin and Alaska business cultures, in hopes of blending the best of both.

Remember that even before it purchased Virgin, Alaska stood out from the pack because of its service:

• Nine straight years with the highest customer satisfaction among traditional North American carriers.

• Best in on-time performance in each of the last six years.

• No. 1 in The Wall Street Journal’s “Middle Seat” scorecard for airlines in four consecutive years.

While Alaska uses a different playbook than Virgin America, both focus on service. This commonality of approach gives us confidence that Alaska can handle an admittedly complicated merger.

Last year, Alaska grew its capacity 10.3%, while traffic rose 13.1%. Capacity growth is expected to slow this year (excluding merger effects), as Alaska, along with many other airlines, cuts back on its investment in new routes. In February, capacity rose just 1.2% while traffic increased 1.7%, causing the load factor, a key measurement of airline efficiency, to increase.

Conclusion

Airlines as a group face several challenges, including rising costs for labor. However, Alaska boasts the best cost structure in the industry, giving it more flexibility for dealing with higher expenses. The airline delivered an operating profit margin of 30.8% last year, best among the eight largest U.S. airlines and well above the industry average of 23.1%.

You can obtain an annual report for Alaska Air Group Inc. at 19300 International Blvd., Seattle, WA 98188, (206) 392-5040, www.alaskaair.com.


 

Alaska Air Group

 
Quarter
Per-Share Earnings
Sales Change
Quarterly Price Range
P/E Ratio Range
Dec '16
$1.56
vs.
$1.46
11%
$91.89
-
$65.60
13 - 9
Sep '16
2.20
vs.
2.16
3%
71.63
-
56.45
10 - 8
Jun '16
2.12
vs.
1.76
4%
83.26
-
54.51
12 - 8
Mar '16
1.45
vs.
1.12
6%
83.09
-
61.58
13 - 9

 
Year (Dec)
Sales (Bil.)
Per-Share Earnings*
Per-Share Dividend
52-Week Price Range
P/E Ratio Range
2016
$5.93
$7.32
$1.10
$91.89
-
$54.51
13 - 7
2015
5.60
6.51
0.80
87.17
-
57.71
13 - 9
2014
5.37
4.18
0.50
60.94
-
36.28
15 - 9
2013
4.96
2.70
0.20
39.26
-
21.66
15 - 8

 
Quadrix Scores†
Overall
Momentum
Value
Quality
Financial Strength
Earnings Estimates
Performance
80
30
89
94
80
16
39

* Earnings exclude special items.
NA Not Available.
† Quadrix® scores are percentile ranks, with 100 the best.
e Dividend and yield estimated.

More Investment Newsletters and Services

Drip Investor

DRIP Investor — how you can buy dividend-paying stocks without a broker.

Visit us at DRIP Investor, your source for dividend reinvestment plans.

Lazy Investor

The Lazy Investor — free weekly e-letter that delivers market updates and stock market information via email.

Visit us at The Lazy Investor, our free investment newsletter.

Horizon Investment

Horizon — registered investment advisor seeks to provide investors at all stages the ability to build, preserve and enjoy wealth.

Visit us at Horizon Investment Services to get started in an investment program that's right for you.

Upside

Upside — discovers today's small and midcap stocks poised to be tomorrow's Blue Chip leaders.

Visit us at Upside, your guide to the best buys in small and midcap stocks.

Current Hotline

Friday, April 28, 2017

After one of the busiest weeks for corporate earnings reports in years

Read More from the Hotline

Stock Spotlight

New Alaska ready to soar

Wednesday, April 26, 2017

Don’t read too much into the name of Alaska Air Group ($91; ALK) — there’s a lot more to the company than flights to and from Alaska.

In the wake of December’s purchase of Virgin America, Alaska Air has become the largest...

Read More from Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com