Earnings announcement season, or as I like to call it, "judgment day" for the stock market, is here again. This is going to be another tough reporting season, and I expect it to affect many big blue chips, particularly multinationals. The strong U.S. dollar will once again be a roadblock for sales and earnings, and it’s becoming increasingly difficult to find companies with strong sales and earnings growth. That is, unless you know where to look.
I’ve been keeping my eyes peeled for buying opportunities, and I’ve found one in a top airliner. Alaska Airlines (ALK) had humble beginnings, starting out with just a single three-seat plane. Now, more than 80 years later, its fleet boasts 137 Boeing 737 jet aircrafts and 51 Bombardier Q400 turboprop aircrafts. Alaska Airlines is the dominant airline in the Pacific Northwest, flying into more than sixty cities across North America and carrying more than 17 million passengers each year.
With each passing year, that number grows. Alaska Air has been expanding its reach eastward, with new nonstop service to Baltimore, Charleston, Nashville, New York City, and Raleigh/Durham, among others. It also recently launched nonstop service from Los Angeles to Baltimore, Portland to St. Louis, and Kona to San Diego. And it doesn’t hurt that the airliner has been benefitting from rock-bottom fuel prices and high customer service ratings.
This all makes me very excited for its next earnings report, which is scheduled for before the market opens Thursday, January 21. Analysts are projecting that ALK will report $1.38 billion in revenue for the quarter—which is a 5.9% increase over Q4 2014. Alaska Airlines is also has 52.1% forecasted earnings growth, and in the past 90 days, its consensus earnings per share estimate has increased from $1.41 to $1.43. Judging by these upward revisions (combined with the general strength of the company) I expect ALK to post a sizeable earnings surprise.
Outside of sales and earnings, Alaska Airlines has plenty of other things going for it. ALK currently trades at just 9.6 times forecasted earnings, which shows that it’s a great value. And for those of you who want some dividend income, it offers a 1.1% annual yield. In preparation for Thursday’s announcement, I consider ALK a Strong Buy.
P.S. I will be speaking at the Irvine Marriott in Irvine, California, on Tuesday, January 26; and at the San Diego Marriott La Jolla in La Jolla, California, on Wednesday, January 27. These seminars start at 7 P.M. and you may attend at no cost, but please call 800-454-1395 to register. I will review where investors can achieve the highest yields in both bonds and stocks, as well my current market outlook, favorite stock picks and have an extensive question-and-answer session.