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GOL Linhas (GOL) Beats on Q3 Earnings & Revenues, Stock Up

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Shares of GOL Linhas Aereas Inteligentes S.A. were up 12.21% on Nov 8 to close the trading session at $21.50, following stellar results in the third quarter of 2017.

The company’s earnings per share of $1.49 outpaced the Zacks Consensus Estimate of 47 cents aided by higher revenues. In the year-ago quarter, this Latin-American carrier had reported breakeven earnings.

Net sales, comprising of cargo and passenger revenues, came in at $858.8 million (R$2.7 billion), surpassing the Zacks Consensus Estimate of $783.3 million. The top line expanded 13.2% on a year-over-year basis on the back of strong demand for air travel. While cargo revenues increased 7%, passenger revenues improved 14.1%.

Operational Statistics

Total revenue passenger kilometres (RPK) — the measure of revenues generated per kilometre per passenger — grew 5.1% year over year. While international RPK increased 10.1%, the same improved 4.5% on the domestic front.

Consolidated available seat kilometres (ASK) — the measure of an airline's passenger carrying capacity — expanded 4.5% year over year. The upside was driven by a 9.1% expansion in international ASK. The metric expanded 3.9% on the domestic front.

During the reported quarter, the company’s total load factor (percentage of seats filled with passengers) was 80.2% compared with 79.8% in the year-ago quarter. The metric improved as capacity expansion was outweighed by traffic growth.

Average fare at this Sao Paulo-based carrier increased 11.6% while average yield per passenger improved 8.6%. Net passenger revenue per available seat kilometres (PRASK) rose 9.2% while net operating revenues per available seat kilometres (RASK) was up 8.3%, which aided the top line. Also, cost per available seat kilometres (CASK), excluding fuel costs, increased 8.3% in the third quarter.

Financials

GOL Linhas exited the quarter with cash and cash equivalents of R$ 602.21 million compared with R$562.2 million at year-end 2016. Additionally, long-term debt totaled R$5,335 million at the end of the quarter compared with R$5,543 million at the end of 2016, which is impressive.

Operating expenses increased 10.5% to R$2,394.9 million mainly owing to a 26.2% rise in salary, wages and benefits. The rise in aircraft fuel costs also contributed to the improvement in operating expenses. While total volume of departures increased 2%, total number of seats available improved 2.4%, both on a year-over-year basis.

Gol Linhas Aereas Inteligentes S.A. Price, Consensus and EPS Surprise

 

Gol Linhas Aereas Inteligentes S.A. Price, Consensus and EPS Surprise | Gol Linhas Aereas Inteligentes S.A. Quote

2017 Outlook

GOL Linhas tweaked its forecast for 2017, earlier this year. The company now expects operating earnings before interest and taxes (EBIT) margin — a measure of the company's earnings ability — around 9% (previous guidance had projected the metric between 7% and 9%). Also, EBITDA margin is anticipated to be around 14% (previous guidance had projected the metric between 12% and 14%).

Currently, the carrier is projecting an average fleet size of 115 and expects capacity (available seat kilometers) to be around 0.5% (previous guidance had projected the metric to either remain flat or decline up to 2% on a year-over-year basis). Volume of departures are anticipated to grow around 4% (previous guidance had projected the metric to decline in the band of 3-5%).

Another important metric, load factor (percentage of seats filled by passengers) is now projected to be around 79% (previous guidance had forecasted the metric in the 77% to 79% range). Going forward, we expect the company’s focus on capacity discipline to result in increasing yields.

GOL Linhas carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apart from GOL, another Copa Holdings (CPA - Free Report) reported better-than-expected third- quarter earnings and revenues on Nov 8.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting third-quarter earnings reports from key players like Ship Finance International Limited (SFL - Free Report) and LATAM Airlines Group S.A. (LTM - Free Report) . While Ship Finance International is expected to release its third-quarter results on Dec 5, LATAM Airlines will unveil its results on Nov 15.

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