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Here's Why AZUL Deserves to be Retained in Your Portfolio
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Azul S.A. (AZUL - Free Report) seems to be benefiting from the steady recovery in air travel demand, both on the domestic and international front. However, the company’s bottom line seems to be affected by the rising operational expenses, mainly fuel costs.
Let’s look at some other factors that make AZUL a stock to be kept intact in portfolios.
The improving air travel scenario is acting in favor of AZUL. The positive effect of the same is traceable in the recent air traffic data for February released by the company. The consolidated passenger traffic increased 25.9% compared to the year-ago reported figure.
To match the increased demand, the company is in the process of growing its capacity, which has increased 25.6% on a year-over-year basis. With such rising demand mixed with increasing capacity, the load factor (% of seats filled by passengers) for the reported month came in at 78.2% which is 20 basis points more than the year-ago reported figure.
The surge in international traffic (up 152.4% year over year) led to a rosy scenario with respect to consolidated traffic. On the domestic front, traffic and capacity increased 9% and 9.1%, respectively.
Alongside the traffic results, the company is also being benefited from its efforts to increase its network through the codeshare agreement with Emirates. Azul’s top line can be seen reaping the benefits of its fleet modernization efforts.
The bottom line is threatened by the escalating fuel prices. The increased prices are mainly due to the demand-supply imbalance.
AZUL’s current ratio of 0.32 for 2022 was lower than the previous year’s reported figure of 0.50. A current ratio of less than 1 implies that a company doesn't have enough liquid assets to cover its short-term liabilities.
In December 2022, the average fuel cost per liter increased 42.5% from the year-ago reported figure, with oil prices moving north. The worsening fuel price scenario affects the bottom line.
Stocks to Consider
Investors interested in the Zacks Airline industry may also consider the following stocks:
Alaska Air Group, Inc. (ALK - Free Report) is being aided by the improved air travel demand situation. In the fourth quarter of 2022, ALK reported better-than-expected results. The company expects a 23-29% increase in the top line during the first quarter of 2023. ALK has been increasing its capacity to meet the upbeat demand. Capacity is expected to increase 11-14% in the first quarter of 2023.
Alaska Air, currently carrying a Zacks Rank #2 (Buy), has evidenced the Zacks Consensus Estimate of the company’s earnings being revised upward by 29.4% in the past 60 days.
United Airlines (UAL - Free Report) , currently carrying a Zacks Rank of 2, is seeing a steady recovery in domestic and leisure air travel demand. On the back of upbeat air travel demand, UAL was profitable in the fourth quarter of 2022. The fourth quarter was the third consecutive profitable quarter at UAL. Driven by solid demand, management expects total revenue per available seat mile (TRASM) to grow almost 25% year over year for the first quarter of 2023. Total revenues are anticipated to grow almost 50% year over year.
United Airlines has evidenced the Zacks Consensus Estimate of the company’s earnings being revised upward by more than 100% in the past 60 days.
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Here's Why AZUL Deserves to be Retained in Your Portfolio
Azul S.A. (AZUL - Free Report) seems to be benefiting from the steady recovery in air travel demand, both on the domestic and international front. However, the company’s bottom line seems to be affected by the rising operational expenses, mainly fuel costs.
Let’s look at some other factors that make AZUL a stock to be kept intact in portfolios.
The improving air travel scenario is acting in favor of AZUL. The positive effect of the same is traceable in the recent air traffic data for February released by the company. The consolidated passenger traffic increased 25.9% compared to the year-ago reported figure.
To match the increased demand, the company is in the process of growing its capacity, which has increased 25.6% on a year-over-year basis. With such rising demand mixed with increasing capacity, the load factor (% of seats filled by passengers) for the reported month came in at 78.2% which is 20 basis points more than the year-ago reported figure.
The surge in international traffic (up 152.4% year over year) led to a rosy scenario with respect to consolidated traffic. On the domestic front, traffic and capacity increased 9% and 9.1%, respectively.
Alongside the traffic results, the company is also being benefited from its efforts to increase its network through the codeshare agreement with Emirates. Azul’s top line can be seen reaping the benefits of its fleet modernization efforts.
AZUL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Some Risks
The bottom line is threatened by the escalating fuel prices. The increased prices are mainly due to the demand-supply imbalance.
AZUL’s current ratio of 0.32 for 2022 was lower than the previous year’s reported figure of 0.50. A current ratio of less than 1 implies that a company doesn't have enough liquid assets to cover its short-term liabilities.
In December 2022, the average fuel cost per liter increased 42.5% from the year-ago reported figure, with oil prices moving north. The worsening fuel price scenario affects the bottom line.
Stocks to Consider
Investors interested in the Zacks Airline industry may also consider the following stocks:
Alaska Air Group, Inc. (ALK - Free Report) is being aided by the improved air travel demand situation. In the fourth quarter of 2022, ALK reported better-than-expected results. The company expects a 23-29% increase in the top line during the first quarter of 2023. ALK has been increasing its capacity to meet the upbeat demand. Capacity is expected to increase 11-14% in the first quarter of 2023.
Alaska Air, currently carrying a Zacks Rank #2 (Buy), has evidenced the Zacks Consensus Estimate of the company’s earnings being revised upward by 29.4% in the past 60 days.
United Airlines (UAL - Free Report) , currently carrying a Zacks Rank of 2, is seeing a steady recovery in domestic and leisure air travel demand. On the back of upbeat air travel demand, UAL was profitable in the fourth quarter of 2022. The fourth quarter was the third consecutive profitable quarter at UAL. Driven by solid demand, management expects total revenue per available seat mile (TRASM) to grow almost 25% year over year for the first quarter of 2023. Total revenues are anticipated to grow almost 50% year over year.
United Airlines has evidenced the Zacks Consensus Estimate of the company’s earnings being revised upward by more than 100% in the past 60 days.