Alaska Air (NYSE: ALK) recently posted its Q1 results, surpassing street estimates with revenue of $2.23 billion and an adjusted loss per share of $0.92, compared to consensus estimates of $2.18 billion in sales and loss per share of $1.09. The company’s performance was supported by better load factor and yields. Despite this, ALK stock has not seen significant growth, with returns of 0% in 2021, -18% in 2022, and -9% in 2023, underperforming the S&P 500 over the same period.
Consistently outperforming the S&P 500 has been challenging for individual stocks in recent years, including heavyweights in the Industrials sector and megacap stars. However, the Trefis High Quality Portfolio has consistently outperformed the benchmark index over the same period, providing better returns with less risk. From a valuation perspective, ALK stock looks attractive, with a projected price of $56 per share, reflecting over 20% upside from its current levels of $45, based on a 12x P/E multiple for ALK and expected earnings of $4.53 per share for 2024.
In the latest quarter, Alaska Air reported a 2% increase in revenue year-over-year, despite a 2% decrease in available seat miles. The company’s load factor and yield both saw positive growth, contributing to overall top-line expansion. However, Alaska Air’s consolidated adjusted pre-tax margin declined to -7% from -5.2% in the previous year, leading to a net loss widening to $0.92 per share compared to $0.62 loss per share in the prior-year quarter.
Alaska Air’s profitability in Q1 was impacted by the grounding of Boeing 737 MAX aircraft earlier in the year due to safety concerns. Following an incident on an Alaska Air (Boeing 737 Max 9) flight in January, the Federal Aviation Administration grounded Boeing 737 Max 9 aircraft. Boeing compensated Alaska Air with $162 million for the financial impact of the grounding. Despite these challenges, Alaska Air exceeded expectations in Q1 and raised its earnings outlook for the full year.
While ALK stock appears undervalued, comparing Alaska Air’s performance with its peers’ metrics can provide valuable insights for investors. With a rise of over 15% in 2024, ALK stock still has potential for further growth. Investors can explore peer comparisons for companies across industries to make informed investment decisions.
