Alaska Air Group ALK is facing significant challenges from rising operating expenses and a deteriorating liquidity position, which are adversely affecting the company’s bottom line and making it an unattractive choice for investors’ portfolios.

Let’s delve deeper.

ALK: Key Risks to Watch

Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has moved 46.6% south in the past 60 days. For the next year, the consensus mark for earnings has been revised 38.8% downward in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.

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Unimpressive Price Performance: Alaska shares have declined 21.4% year to date compared with the industry’s 0.4% fall.

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Weak Zacks Rank: ALK currently carries a Zacks Rank #5 (Strong Sell).

Bearish Industry Rank: The industry to which ALK belongs currently has a Zacks Industry Rank of 138 (out of 246). Such an unfavorable rank places it in the bottom 44% of Zacks Industries.Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.

A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Reckoning the industry’s performance becomes imperative.

Headwinds: Alaska Air Group is under increasing pressure on its bottom line due to rising expenses, which are challenging its financial stability. In the first quarter of 2025, the company’s operating expenses continue to remain at an elevated level. The total operating expenses increased 39% year over year. This rise was largely driven by higher labor costs and elevated maintenance expenses.

Labor costs, comprising salaries and benefits, accounted for 33.8% and rose 40% year over year. Maintenance expenses increased 80% on a year-over-year basis. The company is now grappling with the impact of these escalating costs, which are putting additional strain on its profitability and overall financial health.

Moreover, a downward trend was observed in ALK’s current ratio from 0.98 in 2021 to 0.61 in 2024. Further, in the first quarter of 2025, the current ratio was pegged at 0.58. This, indeed, is concerning as it questions the company’s ability to meet its short-term obligations.

Stocks to Consider

Investors interested in the Transportation sector may also consider Copa Holdings CPA and Ryanair RYAAY.

CPA currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CPA has an expected earnings growth rate of 14.3% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 5.5%. Shares of CPA have risen 22.6% year to date.

RYAAY currently sports a Zacks Rank of 1.

RYAAY has an expected earnings growth rate of 30.5% for the current year. The company has a mixed earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, delivering an average beat of 46.6%. Shares of RYAAY have rallied 27.5% year to date.

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Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report

Copa Holdings, S.A. (CPA) : Free Stock Analysis Report

Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report

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

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