Alaska Airlines ( ALK ) is a Seattle based airliner, and is under major pressure from Delta Air Lines, Inc. ( DAL ). Specifically, the companies are competing for market share of flights out of Seattle. This can prove to be pretty damaging to Alaska. It’s like a David vs. Goliath story, except it looks like Goliath just might eat David.
As Delta is one of the few major airliners left, it commands advantages in Seattle that Alaska simply can’t compete with. For starters, Delta offers nonstop flights internationally to prime global destinations, while Alaska doesn’t. Alaska, like Southwest ( LUV ), only flies Boeing 737’s, so it’s pretty much limited to destinations in North America.
It’s a bit of a sad story, seeing how Alaska is one of Seattle’s biggest corporate philanthropists of the region. The benefits the airline provides to the area can’t simply be measured by revenue. As though things couldn’t look worse, it seems like Delta is going to try and take over Alaska, as it is typical for airliners to acquire competitors. This creates bigger airlines, and less of them too.
We will analyze both companies based off of their earnings performance and other valuation criteria in order to measure the firms against one another. We also do this to see what’s in store for Delta should it choose to take over Alaska Airlines.
Alaska has a Zacks Rank #2 (Buy) as well as an ESP of 0.87%. These two stats paired together makes ALK a likely candidate to beat our EPS estimate for this quarter when it reports its earnings on 4/24/15. There has been movement in our EPS consensus for this quarter. 60 days ago, our estimate called for EPS of $0.92. Since then, our consensus has gone up, calling for earnings of $1.15 per share.
Alaska Airlines has beaten on our consensus in each of the last four quarters, and by an average of 4.48%. The company’s trailing twelve month net profit margin is 11.27%, and its debt to equity for the most recent quarter was 0.32.
Delta Airlines is a Zacks Rank #3 (Hold). The airliner has seen its EPS consensus for the quarter move down consecutively from 30 days ago. A month ago, our estimate called for earnings of $0.74 per share. Since then, the consensus has moved lower, with a current EPS estimate of $0.52 for the quarter.
The company has beaten our consensus estimate in each of the last four quarters, and by and average of 5.11%. The trailing twelve month net profit margin is 1.63%, while the debt to equity is 0.97.
Both companies fair pretty well if we’re going off of the metrics. However, notable difference in debt to equity, net profit margin, as well as the earnings momentum for the quarter thus far suggest that Delta will get some extra value and profit should it choose to buy out Alaska Airlines. It’s a considerable possibility that Delta is heading towards making that happen. How the region of Seattle is affected by a potential takeover of Alaska is still up for debate.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.