On Friday, TD Cowen showed confidence in Alaska Air Group Inc. (NYSE: NYSE:ALK) shares by increasing the airline's price target to $52.00, up from the previous $51.00, while reiterating a Buy rating on the stock. The adjustment follows Alaska Air's updated guidance for its third-quarter 2024 financial results, which were presented in advance of management meetings at a sell-side conference.
The airline has maintained its outlook for Available Seat Miles (ASM) and Cost per Available Seat Mile excluding fuel (CASMex), but now anticipates Revenue per Available Seat Mile (RASM) to rise by 2%, an improvement from the previous forecast which ranged from flat to positive. Moreover, Alaska Air has adjusted its expected fuel costs to approximately $2.65 per gallon, a decrease from the previously estimated $2.90 per gallon.
The revised guidance also includes an updated earnings per share (EPS) estimate for the third quarter, now expected to be between $2.15 and $2.25. This projection is notably higher than the prior EPS estimate, which ranged from $1.40 to $1.60. The airline's outlook is partly attributed to the benefits of industry-wide reductions in ASM, a trend that has been similarly noted by peer companies.
Looking ahead to the full year, TD Cowen anticipates Alaska Air's earnings to surpass $4.50, which sits at the upper end of the airline's prior guidance. This optimistic forecast underscores the firm's positive view on the airline's financial performance and potential for growth.
In other recent news, Alaska Air Group has been making significant strides in its merger with Hawaiian Holdings (NASDAQ:HA). The merger has successfully passed a major regulatory review by the U.S. Department of Justice (DOJ), marking a significant step towards finalizing the transaction. The process now moves forward to the U.S. Department of Transportation (DOT) for further approval.
Alaska Air Group also reported strong second-quarter results, with a GAAP net income of $220 million and an adjusted net income of $327 million. The company's revenue was significantly boosted by nearly $1 billion from premium segments.
Analysts from firms such as Morgan Stanley (NYSE:MS), TD Cowen, and Susquehanna have weighed in on the development, maintaining Overweight, Buy, and neutral ratings respectively.
In a parallel development, Upbound Group has appointed Ms. Charu Jain, a seasoned technology executive, to its Board of Directors. Ms. Jain's extensive experience in digital transformation and innovation is expected to contribute significantly to Upbound's technology-driven services.
Alaska Air Group has also invested in JetZero, a company developing a blended-wing body aircraft aimed at reducing fuel consumption by up to 50%. These are the recent developments for both companies.
InvestingPro Insights
As Alaska Air Group Inc. (NYSE: ALK) garners a favorable outlook from TD Cowen, recent data from InvestingPro further illuminates the company's financial landscape. With a market capitalization of $5.2 billion, Alaska Air is trading at a forward P/E ratio of 10.51, suggesting that the stock may be undervalued relative to its near-term earnings growth potential. This aligns with an InvestingPro Tip indicating that the airline is trading at a low P/E ratio in relation to its anticipated earnings growth.
The company's revenue for the last twelve months as of Q2 2024 stands at $10.52 billion, with a modest revenue growth of 1.74%. Despite this, the airline has maintained a strong gross profit margin of 23.33%, highlighting its ability to manage costs effectively.
Furthermore, Alaska Air has demonstrated resilience with a robust return over the last month, showcasing a 12.57% price total return, which is supported by another InvestingPro Tip highlighting the company's strong performance in the short term.
Analysts' confidence in Alaska Air is echoed by four analysts who have revised their earnings upwards for the upcoming period, a sentiment that is also reflected in the airline's updated guidance. With the next earnings date scheduled for October 17, 2024, investors may find additional InvestingPro Tips, with 9 more tips available at https://www.investing.com/pro/ALK, to further inform their investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.