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ALASKA AIR GROUP (ALK) 48 11/16 +1 9/16. Okay, PaineWebber may like the fundamentals of this regional airline, but this is essentially a trading call. According to analyst Samuel Buttrick, ALK shares have tumbled 25%, in just the last two weeks. The analyst attributes the sharp decline to dissemination of conservative earnings estimates by the company and waning speculation that the company is in play. Based on his strategy of buying airline stocks with positive earnings momentum, after they have fallen 20%-25%, the analyst raised ALK from a "neutral" to an "attractive." In case you haven't been following the airline stocks, this is the story: The group has been on fire since late-1997, benefitting from the decline in oil prices, strong traffic, solid yields, and most important, robust earnings growth. The strength of airline and trucking stocks carried the Dow Jones Transportation Average approximately 14% higher from the beginning of 1997 to its high. In recent weeks, however, the average has come under pressure as some of the institutional momentum money that was pushing these stocks 2%-3% higher per day began to take profits off the table. In spite of ALK's sharp retreat over the past several weeks, the stock still sits 97% above its year-ago price and is up more than 25% year-to-date. For the recently reported 1st qtr, ALK released record numbers. For the period, the Seattle-based carrier earned $0.56 a share, exceeding the First Call mean estimate by 30% and reversing a year-ago loss of $0.56. Revenues increased 9.4% to $416.4 million. Although the company says it is not comfortable with such an aggressive estimate, the PaineWebber analyst expects ALK to earn $4.90 a share for 1998, which places him 7% above the Street mean and about 4% below the high estimate.From briefing.com |
