Alaska Air Group (ALK - Snapshot Report) recently delivered strong fourth quarter results thanks to solid traffic and lower fuel costs. Analysts continued to raise their estimates for Alaska Air following the report, sending the stock to a Zacks Rank #1 (Strong Buy).

While shares of ALK have soared the last few months, the valuation picture still looks reasonable, leaving plenty of upside potential left in the stock.

Alaska Air Group owns Alaska Airlines, which, together with its partner regional airlines, serves more than 100 cities through North America.

Fourth Quarter Results

Alaska Air delivered solid fourth quarter results on January 22. Adjusted EPS soared 71% year-over-year to $0.94, beating the Zacks Consensus Estimate of $0.91. Like many other airlines, Alaska benefited from lower oil prices. Economic fuel cost per gallon fell 18% year-over-year to $2.64, and total operating expenses declined slightly.

Total operating revenue was more-or-less in-line with consensus at $1.306 billion. It was an 8% increase from the same quarter last year. Revenue passenger miles (traffic) climbed 9.5%, but available seat miles (capacity) increased at a 10.6% clip. This led to a one percentage point decline in the load factor to 83.4%.

Alaska Air generated over $1.0 billion in operating cash flow and $344 million in free cash flows in 2014, which allowed the company to buy back 7.3 million shares of stock for $348 million. Alaska Air also announced a whopping 60% increase in its quarterly dividend to $0.20 per share. It currently yields 1.1%.

Estimates Rising

Following strong Q4 results, analysts revised their estimates significantly higher for both 2015 and 2016. This sent the stock to a Zacks Rank #1 (Strong Buy).

You can see the nice upward trajectory in estimates in the company's "Price, Consensus & EPS Surprise" chart:

This strong earnings momentum isn't exclusive to Alaska Air. In fact, the 'Transportation - Airline' industry boasts 12 Zacks Rank #1 (Strong Buy) stocks and ranks as the top industry out of 265 that Zacks ranks based on earnings momentum.

Valuation

Along with rising estimates has come a rising stock price. Shares of ALK have gained an eye-popping 74% since mid-October. But the valuation picture still looks reasonable. Shares trade at less than 12x 12-month forward earnings. And its enterprise value to operating cash flow ratio is a respectable 8x.

The Bottom Line

With earnings estimates continuing to rise and valuation still reasonable, shares of Alaska Air could continue to soar.

Todd Bunton, CFA is a Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor and Surprise Trader services.

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