Imperial Capital Expects Alaska Air Group To Report Record Fourth Quarter Results

Bob McAdoo of Imperial Capital commented on Tuesday that

is expected to report record fourth quarter results following its investor update on January 9. Alaska Air Group announced on January 9 that it expects its PRASM (Passenger Revenue Per Available Seat Mile) for the fourth quarter to decrease 2.5 percent from last year's level. According to McAdoo, the drop in PRASM is likely due to the company's own expansion, and not due to higher competition in the Seattle region. McAdoo adds that the company is likely to continue adjusting its network and schedule to minimize the competitive impact of increased competition in Seattle. However, the analyst sees a more significant driver to earnings per share growth in 2015 being the drop in fuel prices seen over the past few weeks. Jet fuel accounts for 34 percent of Alaska Air's operating expenses in 2013, leading McAdoo to estimate that a 50 percent decline in jet fuel prices will result in “meaningful” cost savings in 2015 which may lead to the company passing along a “meaningful” portion of its savings to investors. Shares are Outperform rated with a $69 price target.