We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Investors Should Retain AZUL Stock for Now
Read MoreHide Full Article
AZUL’s (AZUL - Free Report) upbeat air travel demand both on the international and domestic fronts is boosting its top line. A decline in operating expenses bodes well for the airline. However, the company is grappling with weak liquidity and elevated labor costs.
Factors Favoring AZUL
Driven by an uptick in air travel demand, AZUL's consolidated traffic, measured in revenue passenger kilometers, has been significantly rising. As a result, available seat kilometers (a measure of capacity) increased by 2.6% year over year in the first quarter of 2024. To meet the upbeat demand scenario, AZUL is boosting capacity and expects to increase capacity by 11% in 2024 compared to 2023. We expect this metric to rise by 10.6% year over year in 2024.
AZUL’s total operating expenses of $3.9 billion declined 3.4% year over year in the first quarter of 2024. A decrease in operating expenses bodes well for the company’s bottom line. Fuel expenses plunged 19.1%. Expenses on Airport fees fell by 7.7%. Other cost items, too, declined 13.8% year over year.
AZUL’s fleet upgrade efforts are commendable. The airline operated a passenger fleet of 181 aircraft and had a contractual fleet of 183 aircraft, with an average age of 7.4 years, excluding Cessna aircraft. By the end of the first quarter of 2024, AZUL derived approximately 83% of its capacity from next-generation aircraft, surpassing all regional competitors.
Key Risks
At the end of the first quarter of 2024, AZUL’s gross debt of $2.7 billion surged 12.8% year over year, significantly outpacing its cash and cash equivalent of $274 million, raising liquidity concerns. Moreover, the current ratio (a measure of liquidity) at the end of the quarter stood at 0.34. A current ratio of less than 1 is undesirable as it indicates that the company does not have enough cash to meet its short-term obligations.
Labor costs, comprising salaries and benefits (accounting for 17.4% of the total operating expenses), rose by 25.5% year over year to $675 million in the first quarter of 2024. This northward movement in expenses on labor does not bode well for AZUL's bottom line.
Shares of AZUL have declined 65.8% in the past year compared to its industry’s growth of 17.2% in the same period.
SkyWest has an expected earnings growth rate of 787% for the current year.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 106% in the past year.
KEX has an expected earnings growth rate of 42.5% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of Kirby have climbed 60.3% in the past year.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Here's Why Investors Should Retain AZUL Stock for Now
AZUL’s (AZUL - Free Report) upbeat air travel demand both on the international and domestic fronts is boosting its top line. A decline in operating expenses bodes well for the airline. However, the company is grappling with weak liquidity and elevated labor costs.
Factors Favoring AZUL
Driven by an uptick in air travel demand, AZUL's consolidated traffic, measured in revenue passenger kilometers, has been significantly rising. As a result, available seat kilometers (a measure of capacity) increased by 2.6% year over year in the first quarter of 2024. To meet the upbeat demand scenario, AZUL is boosting capacity and expects to increase capacity by 11% in 2024 compared to 2023. We expect this metric to rise by 10.6% year over year in 2024.
AZUL’s total operating expenses of $3.9 billion declined 3.4% year over year in the first quarter of 2024. A decrease in operating expenses bodes well for the company’s bottom line. Fuel expenses plunged 19.1%. Expenses on Airport fees fell by 7.7%. Other cost items, too, declined 13.8% year over year.
AZUL’s fleet upgrade efforts are commendable. The airline operated a passenger fleet of 181 aircraft and had a contractual fleet of 183 aircraft, with an average age of 7.4 years, excluding Cessna aircraft. By the end of the first quarter of 2024, AZUL derived approximately 83% of its capacity from next-generation aircraft, surpassing all regional competitors.
Key Risks
At the end of the first quarter of 2024, AZUL’s gross debt of $2.7 billion surged 12.8% year over year, significantly outpacing its cash and cash equivalent of $274 million, raising liquidity concerns. Moreover, the current ratio (a measure of liquidity) at the end of the quarter stood at 0.34. A current ratio of less than 1 is undesirable as it indicates that the company does not have enough cash to meet its short-term obligations.
Labor costs, comprising salaries and benefits (accounting for 17.4% of the total operating expenses), rose by 25.5% year over year to $675 million in the first quarter of 2024. This northward movement in expenses on labor does not bode well for AZUL's bottom line.
Shares of AZUL have declined 65.8% in the past year compared to its industry’s growth of 17.2% in the same period.
Image Source: Zacks Investment Research
Zacks Rank
AZUL currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include SkyWest (SKYW - Free Report) and Kirby Corporation (KEX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
SkyWest has an expected earnings growth rate of 787% for the current year.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 106% in the past year.
KEX has an expected earnings growth rate of 42.5% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of Kirby have climbed 60.3% in the past year.