Cowen Cuts Alaska Air Group EPS Estimates, Lowers Price Target

Cowen has slashed its EPS estimate and price target for Alaska Air Group, Inc. ALK after the airline updated its second-quarter guidance and provided May unit revenue.

Analyst Helane Becker cut the second-quarter EPS view to $2.05 from $2.13, compared to the consensus estimate of $2.11. For 2016, the analyst now forecasts EPS of $7.20, down from prior estimate of $7.30, compared to the consensus estimate of $7.38.

However, Becker reiterated Outperform rating, but lowered price target to $87 from $88.

Alaska reported a 6.5 percent decline in May unit revenue, in line with the April decline reported.

"May's unit revenue was consistent with reports from other airlines who did not see improvement from April to May. Alaska will see a sequential decline in capacity growth from 1H to 2H, which should help stabilize the company's unit revenue," Becker wrote in a note.

Related Link: Alaska Airlines Launches Seasonal, Non-Stop Service

Alaska Air also updated second-quarter investor guidance and "continues to forecast capacity growth of 11 percent, with mainline capacity up by 9.5 percent." However, the company sees capacity slowing in 2H, growing at about 4.5 percent down from about 12 percent in the first half. Furthermore, Alaska Air forecasts second-quarter non-fuel unit costs to decline by 1.5 percent, compared to the previous 1 percent decline.

"May pricing was somewhat choppy and June continues to remain challenged. We expect to see a modest m/m improvement," Becker added.

At the time of writing, shares of Alaska Air were down 3.48 percent at $62.05.