Alaska Air Group (ALK) Hits 52-Week Low: What's Taking It Down?

Shares of Seattle, Washington-based Alaska Air Group (NYSE:ALK) fell to a 52-week low of $58.74 during the trading session on Jun 23. Shares of the carrier, however, recovered marginally to close the session at $59.14.

Terror Attacks Hit Carriers

Historically, acts of terror hit tourism-focused stocks as travel plans take a hit due to security fears. The same happened following the Jun 12 mass shooting at a nightclub in Orlando.

This is exemplified by the NYSE ARCA Airline index declining over 4% since the Orlando shootings. Moreover, the bearish effect on the industry can be gauged from the fact that the “Trans-Airline” sector currently has a Zacks Industry Rank #204 – placing it in the bottom 1/3rd of the 260+ industry groups.

ALASKA AIR GRP Price and Consensus

ALASKA AIR GRP Price and Consensus | ALASKA AIR GRP Quote

Alaska Air Group: No Exception

Despite strong fundamentals, Alaska Air Group has been grappling with the recent turn of events, at least for now. The shares of the carrier have declined more than 11% since the Orlando attacks, described as the worst in the history of the U.S.

Even though we are positive on Alaska Air Group’s impending acquisition of low-cost carrier Virgin America (NASDAQ:VA) , the former’s CEO Brad Tilden is apparently debating whether to treat the two brands separately following the completion of the merger. Naturally, shares of Alaska Air Group are under pressure with not much clarity available on the structural front in the event of the deal materializing.

Moreover, Alaska Air Group is being affected by unit revenue issues like its peers which include the likes of JetBlue Airways (NASDAQ:JBLU) . In the first quarter of 2016, consolidated passenger revenue per available seat mile (PRASM: a measure of unit revenue) decreased 7.7% year over year to 10.84 cents. Continuous decline in this key metric will hurt the stock significantly.

Estimates Trimmed

We note that earnings estimates for Alaska Air Group are moving south due to the adverse factors. For the second quarter, earnings per share estimates have declined 3 cents to $2.08 per share owing to downward revisions. Moreover, for full-year 2016, the Zacks Consensus Estimate went down by 13 cents to $7.29 per share in the last month. Likewise, the Zacks Consensus Estimate for 2017 declined by 15 cents over the same time frame to $7.62 per share.

No wonder, Alaska Air Group slipped to a Zacks Rank #4 (Sell) which indicates that the stock will underperform the broader market over the next one to three months.

An Airline Gem

With Alaska Air Group under pressure, investors interested in the airline space may consider SkyWest, Inc. (NASDAQ:SKYW) , which sports a Zacks Rank #1 (Strong Buy).