Alaska Air Group (ALK Quick QuoteALK - Free Report) is benefiting from an uptick in air travel demand (particularly on the leisure front). The upsurge in passenger volumes makes the ALK stock an attractive investment opportunity currently.

Let’s delve deep to unearth the factors working in favor of this Zacks Rank #1 (Strong Buy) stock.

Northward Earnings Estimates: The Zacks Consensus Estimate for current-quarter and current-year earnings has been revised upward 25.8% and 13.8%, respectively, in the past 60 days. Such favorable estimate revisions reflect brokers’ confidence in the stock.

Given the wealth of information at the brokers’ disposal, it is in the best interest of investors to be guided by their expert advice and the direction of their estimate revisions. This is because it serves as a key indicator in determining the price of a stock.

Buoyant Air-Travel Demand: Improvement in air-travel demand bodes well for ALK. On the back of robust air-travel demand during summer, ALK gave a bullish outlook for the third quarter of 2024.

Alaska Air raised its third-quarter 2024 adjusted earnings per share guidance to $2.15-$2.25 compared with the previous range of $1.40-$1.60. ALK now expects its third-quarter 2024 revenue per available seat mile (a key measure of unit revenues) to be up 2% on a year-over-year basis compared with the previous forecast of flat to positive. It now anticipates third-quarter 2024 economic fuel cost per gallon in the range of $2.60-$2.70 (prior view: $2.85-$2.95).

Other Factors: Alaska Air’s fleet-modernization initiatives are encouraging. In 2023, ALK resumed the share repurchase program. The restrictions, under the CARES Act, prohibited airlines from paying dividends or buying back shares till Sept. 30, 2022. In 2023, ALK repurchased nearly 3.5 million shares for $145 million. The airline has remained active on the buyback front in the first two quarters of 2024 as well.

Impressive Price Performance: Driven by the rosy air-travel-demand scenario, shares of ALK  have gained 18% in the past month compared with its industry’s growth of 11.1%.

One-Month Price Comparison

Image Source: Zacks Investment Research

Bullish Industry Rank: The industry, to which ALK belongs, currently has a Zacks Industry Rank of 91 (of 250 plus groups). Such a solid rank places the industry in the top 36% of the Zacks industries. Studies have shown that 50% of a stock price movement is directly tied to the performance of the industry group that it hails from.

In fact, an ordinary stock in a strong group is likely to outperform a robust stock in a weak industry. Therefore, taking the industry’s performance into consideration becomes imperative.

Other Key Picks

Investors interested in the Zacks Transportation sector may also consider C.H. Robinson Worldwide (CHRW Quick QuoteCHRW - Free Report) and Air Transport Service Group .

C.H. Robinson Worldwide currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

CHRW has an expected earnings growth rate of 25.2% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have risen 50% in the past six months.

ATSG carries a Zacks Rank #2 (Buy) at present and has an expected earnings growth rate of 12% for the current year. The company has a mixed track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missing twice. The average miss is 7.7%. Shares of ATSG have climbed 17% in the past six months.