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Market Prices In Many Factors ahead of Alaska Air's 3Q16 Earnings

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Market Prices In Many Factors ahead of Alaska Air's 3Q16 Earnings PART 1 OF 7

Alaska Air Group’s Stock Reverses Its Trend in 3Q16

Stock movement

The acquisition of Virgin America (VA) has overshadowed Alaska Air Group’s (ALK) stock since the announcement was made. The bidding war with JetBlue Airways (JBLU) led to Alaska Air Group finally paying a hefty sum of $2.6 billion to acquire Virgin America, which did not go over well with Alaska Air Group’s investors. Virgin America’s poor 2Q16 performance also subdued its stock.

Alaska Air Group’s (ALK) stock fell from $80 to a low of $55, and it recovered to $69.91 on October 10, 2016. Most of this gain has come in 3Q16, when it gained almost 13%. However, year-to-date (or YTD) 2016, ALK is still down 14%.

Alaska Air Group&#8217;s Stock Reverses Its Trend in 3Q16

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The three legacy air carriers also lost stock value in the same period. United Continental (UAL) lost ~6%, followed by American Airlines’s (AAL) 9% loss and Delta Air Lines’s (DAL) loss of 22%.

Regional carriers have also lost value. JetBlue Airways (JBLU) saw the largest loss, dropping 22% YTD. Allegiant Travel (ALGT) lost almost 13%, and Southwest Airlines (LUV) lost 8%. Spirit Airlines (SAVE) was the only exception, with a 4% gain in the same period.

The broader market, tracked by the S&P 500 Index (SPY), has gained ~5% YTD. Because airline services are discretionary budget items and compete for the consumer’s dollars, we can compare the airline’s performance with the consumer discretionary sector. The Consumer Discretionary SPDR ETF (XLY) rose 1% in the same period. The Dow Jones US Airline Index (DJUSAR) has lost 13% YTD.

Series overview

Alaska Air Group (ALK) is set to announce its 3Q16 financial results on October 20, 2016. In this series, we’ll learn what investors can expect for 3Q16 and, more importantly, for fiscal 2016. We’ll also discuss key indicators that investors should watch.

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