How Should Investors Play Alaska Air Stock Post Bearish Q3 EPS View?

Alaska Air Group, Inc. ALK has unveiled disappointing third-quarter 2025 earnings guidance, citing issues related to higher fuel expenses and operational issues.

Given this backdrop, the question that naturally arises is: Should investors buy, hold, or sell ALK stock now? A more in-depth analysis is needed to make that determination. Before diving into ALK’s investment prospects, let’s take a glance at its financial numbers.

ALK’s Q3 EPS Hurt By High Fuel Costs & Operational Issues

ALK now projects its third-quarter 2025 adjusted earnings per share to be at the low end of its previously guided range of $1.00-$1.40. The downside has been attributed to higher fuel costs, coupled with operational challenges during the summer, which have weighed on unit costs. The Zacks Consensus Estimate is currently pegged at $1.35 per share.

Notably, ALK has been witnessing high West Coast refining margins due to ongoing refinery disruptions. This has led to an increase in fuel cost expectations, with guidance now in the range of $2.50–$2.55 per gallon from the prior view of nearly $2.45 per gallon.

Irregular operations, which include weather and air traffic control issues, have pushed up expenses related to overtime, premium pay and passenger compensation. Further, the July IT outage continues to have an anticipated impact of almost 10 cents per share on the company’s bottom line.

The negative sentiment surrounding ALK stock is evident from the fact that the Zacks Consensus Estimate for third-quarter 2025 earnings has been revised downward by 26.2% in the past 60 days.

Apart from ALK, other airline companies such as Delta Air Lines DAL and JetBlue Airways Corporation (JBLU) have also unveiled their updated third-quarter 2025 guidance.

Delta Air Lines

Delta Air Lines gave an improved projection for the third quarter of 2025, driven by the stabilization and improvement of air travel demand. Highlighting the improvement in air travel demand, Delta Air Lines, while presenting at the Morgan Stanley Laguna Conference, gave a better view of revenues for the third quarter of 2025. The airline now expects revenue growth in the 2-4% band in the September quarter from third-quarter 2024 actuals, which is in the upper half of the guidance range provided while releasing its second-quarter 2025 results. Adjusted revenues (excluding third-party refinery sales) are expected to be in the $14.9-$15.2 billion range.

In July, DAL had projected third-quarter revenues on an adjusted basis to either remain flat or increase up to 4% from the third quarter of 2024 level.

JetBlue

JetBlue now anticipates available seat miles (ASMs) for the third quarter to be flat to up 1% year over year, compared with the prior guidance of down 1% to up 2%. Operating revenue per ASM (RASM) is now projected to decline in the range of 1.5%-4% year over year, an improvement from the prior outlook of 2%-6% decrease.

Consistency in air travel demand continued from the summer season through August and the Labor Day holiday, all of which was reflected in the rising number of bookings within 14 days of travel. Strong operational performance during August, in addition to the carrier’s cost management actions, aided JBLU’s non-fuel unit costs. JBLU now expects third-quarter costs per available seat mile (excluding fuel and special items) to increase in the range of 3.5-5.5%, down from the prior expectation of a 4%-6% increase.

Given this backdrop of three airline companies providing their updated third-quarter 2025 outlook, we have done a price comparison among them over the past three months.

Shares of ALK have had a good run of late, improving in double-digits over the past three months. The encouraging price performance resulted in ALK outperforming the Zacks Airline industry as well as its fellow U.S. airline operators, Delta Air Lines and JetBlue, in the same timeframe.

ALK Three-Month Price Comparison Vs. DAL, JBLU & Industry

Impressive Valuation Picture for ALK Stock

From a valuation perspective, ALK is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio.

The stock has a forward 12-month P/S-F12M of 0.45X compared with 0.56X for the industry over the past five years. The company’s forward 12-month P/S-F12M ratio is also below the median level of 0.66X over the past five years. These factors indicate that the stock’s valuation is attractive. ALK has a Value Score of A.

ALK P/S Ratio (Forward 12 Months) Vs. Industry

Not an Opportune Time to Buy ALK Stock

We observe that Alaska Air’s third-quarter 2025 earnings expectations have been weighed down by higher fuel costs and operational issues like the July IT outage and weather and air traffic control issues.

On the brighter side, ALK has witnessed solid revenue trends with unit revenues for the third quarter, anticipated to be near the high end of the prior guidance of flat to low-single-digit growth. Premium cabin strength and a double-digit surge in corporate revenues, coupled with the widespread popularity of ALK’s loyalty platform, act as other tailwinds. Further, the stock’s attractive valuation is also noteworthy.

Considering all these factors, we advise investors to wait for a better entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank #3 (Hold) supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research