What To Expect From Alaska Air Group (ALK) In Q3 Earnings?

Alaska Air Inc., (NYSE:ALK) the parent company of Alaska Airlines, is scheduled to report third-quarter 2016 results on Oct 20, before the market opens.

Last quarter, the company recorded a positive earnings surprise of 1.92%. Moreover, Alaska Air beat estimates in each of the last four quarters with the average earnings surprise at 2.50%. Let’s see how things are shaping up for this announcement.

Factors at Play this Quarter

One of the main concerns for investors of Alaska Air is the delay in the company’s proposed merger with Virgin America Inc. (VA). The companies had agreed that they will not close the merger till Oct 17, so that U.S. Department of Justice (DOJ) would have more time to review the deal. We expect the company to provide details on the expected merger closing date at its earnings release. Alaska Air also faces intense competition from peers like United Continental Holdings Inc. (NYSE:UAL) and Delta Air Lines Inc. (NYSE:DAL) .

However, we are positive on the company’s traffic results for the month of September. The company witnessed an increase in both traffic and load factor. We are also impressed with Alaska Air’s efforts to reward shareholders.

Earnings Whispers

Our proven model does not conclusively show that Alaska Air is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. As seen below, this is not the case for Alaska Air.

Zacks ESP: The Most Accurate estimate stands at $2.05 and Zacks Consensus Estimate is pegged at $2.04. Thus, the ESP is +0.49%.

Zacks Rank: Alaska Air carries a Zacks Rank #4 (Sell).

Please note, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Here is a stock you may want to consider as our model shows it has the right combination of elements to post an earnings beat this quarter.

Student Transportation Inc. (TO:STB) has an Earnings ESP of over +11.11% and a Zacks Rank #2. The company is expected to report third-quarter earnings on Nov 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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