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Investing.com - UBS initiated coverage on Alaska Air (NYSE:ALK) with a Neutral rating and a $49.00 price target on Monday. According to InvestingPro data, the airline currently trades at a market capitalization of $6.2 billion and appears undervalued based on comprehensive Fair Value analysis.
The investment firm expects Alaska Air’s second-quarter results to meet guidance ranges, noting that demand likely stabilized as the quarter progressed. With earnings scheduled for July 17, investors following InvestingPro analysis note the company’s strong revenue growth of 20.8% over the last twelve months. UBS projects a 1.0% decline in revenue per available seat mile (RASM) compared to the consensus estimate of a 0.9% decline, falling within the company’s guidance of flat to low-single-digit percentage decrease.
UBS believes Alaska Air had anticipated a year-over-year RASM deceleration in June relative to April and May, reflecting increased industry capacity in June. The firm’s analysis suggests Alaska Air maintained adequate load factors, though fares were likely lower compared to the previous year. InvestingPro analysts highlight that the company is trading at a low P/E ratio relative to its near-term earnings growth, with analysts forecasting EPS of $3.55 for fiscal year 2025.
The Alaska brand potentially faced pressure from weakness in domestic main cabin performance, particularly in San Francisco where United Airlines has recently added significant capacity. Meanwhile, the Hawaiian Airlines brand and Premium & Loyalty segments likely continued to perform well.
On the cost side, UBS estimates a 7.5% increase in cost per available seat mile excluding fuel (CASM-ex) due to challenging comparisons, a new Hawaiian Airlines flight attendant agreement, and the timing of maintenance expenses. UBS forecasts second-quarter earnings per share of $1.56, slightly above the Factset consensus of $1.53 and within Alaska Air’s guidance range of $1.15-$1.65.
In other recent news, Alaska Air Group reported a challenging first quarter for 2025, with earnings falling short of expectations. The company posted an adjusted net loss of $95 million and earnings per share of -0.77, missing the forecasted -0.71. Revenue was $3.1 billion, below the anticipated $3.18 billion. Despite these setbacks, Alaska Air remains confident in its long-term growth strategy, aiming for a $10 EPS target by 2027. On the analyst front, Morgan Stanley (NYSE:MS) reiterated an Overweight rating for Alaska Air, citing the airline’s strategic expansion into European routes as a positive development. Additionally, Alaska Air announced a new partnership with Philippine Airlines, expanding its global network and offering more options for Mileage Plan members. The company also approved new stock plans and amended bylaws, reflecting corporate changes following its annual meeting. Meanwhile, JetZero plans a significant investment in North Carolina, with a $4.7 billion facility aimed at producing its Z4 blended wing aircraft.
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