Hudson Securities Comments On Alaska Air Financial Outlook

In an 8K filing yesterday, Alaska Air Group ALK updated its 4Q financial outlook, with better than expected holiday traffic prompting more flying which in turn drove stronger than expected revenue performance. And unlike others, ALK did not suffer from bad weather. On the cost side, timing works to the carrier's advantage, with labor and mtce costs shifting into 1Q11, leaving overall nonfuel unit costs lower vs Hudson's model. With revenues $32M higher; unit costs lower, Hudson Securities is lifting 4Q10 EPS estimate to $1.20. Our FY 2010 EPS goes to $7.05 accordingly, while its 2011 estimate remains unchanged. The stronger 4Q earnings outlook does not drive an upward revision to Hudson's 2011 outlook given a yellow flag from LUV capacity. It's $70 PT is based on shares trading at 9x its unchanged 2011E EPS. ALk is trading higher at $61.64