On Nov. 14, 2024, Azul S.A. (AZUL) reported lower-than-expected third-quarter 2024 results, wherein the company’s bottom line and top line lagged the Zacks Consensus Estimate.
Adding to the bearishness, Azul has lowered its 2024 capacity expectation. The company now expects its full-year capacity to increase by almost 6% (prior view: up 7%) from 2023. The change in expectation of capacity growth is due to the reduction in AZUL’s domestic capacity due to the devastating floods in Rio Grande do Sul, the temporary reduction in AZUL’s international capacity in the first half of the year and manufacturers’ new aircraft delivery delays.
AZUL shares have plunged 9.7% following its Nov. 14 earnings release.
The lower-than-expected results naturally raise the question: Should investors buy AZUL stock now following the dip in share price? A more in-depth analysis is needed to make that determination. Before diving into AZUL’s investment prospects, let’s take a glance at its quarterly numbers.
Snapshot of AZUL’s Q3 Results
Azul incurred a loss of 32 cents per share in the third quarter of 2024, wider than the Zacks Consensus Estimate of a loss of 10 cents.
Find the latest EPS estimates and surprises on ZacksEarnings Calendar.
Total revenues of $925.1 million lagged the Zacks Consensus Estimate of $953.2 million. Despite lagging the consensus mark, AZUL’s top line benefited from a healthy demand environment and robust ancillary revenues in the third quarter of 2024. With more people taking to the skies, Azul’s passenger revenues, contributing 92.8% to the top line, grew 4% year over year.
Cargo revenue and other grew 8.8% year over year owing to improved performance of AZUL’s ancillary revenues and solid domestic demand for its cargo solutions and exclusive network, and the partial recovery of its international operation. These were, however, partially offset by the reduction in AZUL’s domestic capacity in RioGrande do Sul state.
Consolidated traffic, measured in revenue passenger kilometers (RPKs), rose 4.3% (up 8.4% domestic but down 8.4% on the international front) year over year. Consolidated available seat kilometers (ASK), measuring an airline's passenger-carrying capacity, increased 3.7% from the year-ago quarter, with a 6.8% rise in domestic capacity and a 7% decline in international capacity. Since traffic outpaced the capacity expansion, load factor (percentage of seats filled with passengers) grew 0.5 percentage points to 82.6%. Our estimate is pegged at 82.8%.
Azul’s total revenues per ASK or RASK were R$42.87 cents, up 12.2% sequentially and 0.6% year over year. Passenger revenues per ASK or PRASK increased 12.6% sequentially and 0.3% year over year on the back of AZUL’s rational capacity deployment and the sustainable competitive advantages of its business model.
Some Tailwinds Working in Favor of AZUL Stock
AZUL’s consistent focus on managing costs throughout its business has paid off. Evidently, cost per ASK (CASK) stayed almost flat compared with the reported figure for the third quarter of 2023. CASK, excluding fuel, fell 2.8% year over year. This marks a solid improvement given the 13.6% average depreciation of the Brazilian real against the US dollar and 4.2% inflation over the last 12 months.
AZUL also hopes to reduce its CASK with the help of its next-generation fleet, along with several other efficiency initiatives. To this end, AZUL has successfully reduced its full-time equivalent (FTE) employees by 1.5% sequentially, even with the airline growing 10%. This led to an improvement of FTE per ASK of 11.3%.
AZUL’s cost-cutting initiatives should boost profitability. Notably, in third-quarter 2024, AZUL reported an all-time record EBITDA of R$1.65 billion, increasing 6% year over year and 57.1% sequentially. EBITDA margin of 32% improved 50 percentage points from the year-ago quarter. Profitability amid increasing fuel cost per liter and higher average exchange rate is noteworthy.
Backed by a robust demand environment in both domestic and international markets, the positive trend in fuel prices and a higher number of fuel-efficient aircraft entering the fleet, Azul continues to anticipate its full-year EBITDA to be around R$6.0 billion.
For 2025, AZUL anticipates EBITDA to be R$7.4 billion, owing to strong travel demand, a rational competitive environment, and robust growth in its business units. Additionally, the restructured financing plan (aimed at improving liquidity and cash generation and reducing leverage) is likely to enable Azul to achieve its target for 2025.
Impressive Valuation Picture for AZUL Stock
From a valuation perspective, AZUL is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio. The reading is also below its median over the last five years. The company has a Value Score of A.
Headwinds Confronting AZUL Stock
The northward movement in operating expenses is hurting AZUL’s bottom line and challenging its financial stability. Operating expenses in third-quarter 2024 grew 3.8% year over year owing to the 3.7% increase in total capacity, 13.6% depreciation of the Brazilian real against the US dollar and an 8.6% increase in fuel price, offset by higher productivity and cost-reduction initiatives.
Further, AZUL has a disappointing earnings surprise history. The company’s earnings lagged the Zacks Consensus Estimate in each of the last four quarters, delivering an average miss of 100.76%. Driven by this downbeat earnings performance, AZUL’s shares have plunged 40.5% over the past three months, underperforming its industry. Additionally, AZUL’s price performance compares unfavorably with that of other airline operators like Copa Holdings, S.A. (CPA)and Ryanair Holdings RYAAY in the same time frame.
Three-Month Price Comparison
Given the headwinds surrounding the stock, earnings estimates have been southbound, as shown below.
How Should Investors Approach AZUL Stock?
It is understood that AZUL stock is attractively valued, and upbeat air travel demand is contributing to AZUL’s top-line and EBITDA growth. AZUL is also gaining from its cost-cutting initiatives.
However, investors should refrain from rushing to buy the dip in AZUL now. For long-term investors, a single quarter’s results are not so important as they would rather base their investment decision on the underlying fundamentals.
AZUL faces quite a few the headwinds as highlighted above. In our view, investors should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank #3 (Hold) supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Nvidia, Target, TJX lead earnings reports Wednesday, many more to follow
Earnings season continues, and we're here to highlight the companies expected to report earnings on Wednesday, November 20, 2024, so you can prepare for the market action. Leading the pack are tech giant Nvidia (NASDAQ:NVDA), retail powerhouse Target (NYSE:TGT), and off-price retailer TJX Companies (NYSE:TJX), along with several other notable firms across various sectors.
• Duos Tech (NASDAQ:DUOT): EPS -$0.25, Revenue $2.8M
• Intchains ADR (ICG): EPS and Revenue not available
• Thunderbird Entertainment (THBRF): EPS and Revenue not available
Be sure to check back daily for updates and insights into the earnings season and real-time results here and here. Do you want to trade the earnings of the biggest companies like a pro? Then get InvestingPro now and access over 1000 metrics that will give you a significant advantage in the shark tank that is Wall Street. Click here.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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Here's Why Investors Should Add Copa Holdings Stock to Their Portfolio
Copa Holdings, S.A. CPA performed well in the past year and has the potential to sustain the momentum in the future. If you have not taken advantage of its share price appreciation yet, it’s time to do so.
Let’s take a look at the factors that make the stock a strong investment pick at the moment.
An Outperformer: A glimpse at the company’s price trend reveals that its shares have gained 15.1% in the past three months.
Solid Zacks Rank: CPA presently carries a Zacks Rank #2 (Buy). Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities. Thus, the company is a compelling investment proposition at the moment.
Northward Estimate Revisions: The positivity surrounding the stock is evident from the fact that the Zacks Consensus Estimate for fourth-quarter 2024 earnings has improved 1.5% over the past 60 days. The Zacks Consensus Estimate for 2024 earnings has moved north 4.1% in the past 60 days.
Positive Earnings Surprise History: CPA has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 16.03%.
Driving Factors: Upbeat air travel demand has been aiding Copa Holdings' revenues. We are encouraged by Copa Holdings' initiatives to modernize its fleet. Apart from adding planes, this carrier is replacing the outdated models as part of its fleet modernization efforts to lower carbon dioxide emissions.
CPA ended the second quarter of 2024 with a consolidated fleet of 109 aircraft, which comprises 67 Boeing 737-800s, 32 Boeing 737 MAX 9s, nine Boeing 737-700s and one Boeing 737-800 freighter. Copa Holdings expects to end 2024 with 112 aircraft.
Other Stocks to Consider
Some other top-ranked stocks from the Zacks Transportation sector are C.H. Robinson Worldwide (CHRW) and Wabtec Corporation WAB. Each stock presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
CHRW has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters (missed the mark in the remaining quarter), delivering an average surprise of 10.29%.
CHRW has an expected earnings growth rate of 32.42% for 2024. The Zacks Consensus Estimate for CHRW 2024 earnings has been revised 7.3% upward over the past 90 days. Shares of CHRW have gained 26.2% so far this year.
WAB has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters (missed the mark in the remaining quarter), delivering an average surprise of 9.46%.
The Zacks Consensus Estimate for WAB’s 2024 earnings has been revised 2.5% upward over the past 90 days. WAB has an expected earnings growth rate of 28.55% for 2024. Shares of WAB have gained 58.5% so far this year.
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Allegiant October 2024 Traffic Numbers Declines Year Over Year
Allegiant Travel Company ALGT recently reported disappointing traffic numbers for October 2024.
Scheduled traffic (measured in revenue passenger miles) fell 15.7% from the October 2023 levels. Capacity (measured in available seat miles) for scheduled service fell 10.2% year over year. As traffic decline was more than capacity, the load factor (percentage of seats filled by passengers) in October 2024 declined to 78.5% from 83.7% a year ago.
Total departures (scheduled services) fell 10.7% in October 2024 from a year ago. However, its average stage length (miles) grew 1.6% year over year.
For the total system (including scheduled service and fixed fee contract), Allegiant carried 17% less passengers in October 2024 from the year-ago period. System-wide capacity declined 9.2% in October 2024 on a year-over-year basis.
The fuel price per gallon in October 2024 is estimated to have been $2.52.
Drew Wells, chief commercial officer at Allegiant Travel Company, stated, "As observed below and consistent with commentary from our third quarter earnings call, hurricanes Helene and Milton had an outsized impact on our business. We canceled nearly 1,000 flights between late September and early January, with approximately two-thirds of those cancelations occurring during the month of October. We are encouraged by booking trends following the election, which suggest a faster-than-expected recovery for the impacted areas. We will continue monitoring these trends with the intent of updating guidance, as needed."
Apart from ALGT, other airline companies who have reported traffic numbers for October 2024 are as follows.
Copa Holdings, S.A.CPA reported traffic numbers for October 2024 on the back of upbeat air-travel demand. Driven by high passenger volumes, revenue passenger miles (a measure of traffic) improved on a year-over-year basis in October.
To match the demand swell, CPA is increasing its capacity. In October, available seat miles (a measure of capacity) increased 6.6% year over year. Revenue passenger miles increased 6.5% year over year. Although traffic improved on a year-over-year basis, it failed to outpace capacity expansion. As a result, the load factor (percentage of seats filled by passengers) fell to 87.4% from 87.6% in October 2023.
Ryanair HoldingsRYAAY, a European carrier, has also reported impressive traffic numbers for October 2024.
The number of passengers transported on Ryanair flights was 18.3 million in October 2024, reflecting a 7% year-over-year increase. The October load factor (percentage of seats filled by passengers) of 93% remained flat on a year-over-year basis, reflecting consistent passenger demand for the airline's services. RYAAY operated more than 103,200 flights in October 2024.
To meet the upbeat demand, Ryanair expects its traffic view to grow 8% on a year-over-year basis for fiscal 2025, subject to no worsening of current Boeing delivery delays.
ALGT’s Zacks Rank & Price Performance
ALGT currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of ALGT have gained 94.7% over the past three months compared with 15.8% growth of the Zacks Airline industry.
Three-Month Price Comparison
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Airline Stock Roundup: LUV to Trim Workforce, CPA & SAVE in Focus
In the past week, Southwest Airlines LUV announced plans to reduce its workforce to match the lower capacity partly due to delivery delays from Boeing BA. Driven by upbeat air-travel demand, Copa Holdings CPA reported a year-over-year uptick in traffic for November.
Spirit Airlines SAVE, in a filing with the Securities and Exchange Commission, informed of its inability to file a quarterly earnings report by its due date without “unreasonable effort or expense.” The stock has plunged lately, with bankruptcy looming reportedly after talks regarding a merger with Frontier Airlines halted. Frontier Airlines is owned by Frontier Group ULCC.
Read the Last Airline Roundup here
Recap of the Recent Most Important Stories
1 Southwest Airlines decided to offer buyouts to workers at 18 airports across the United States in a bid to match its workforce with the reduced capacity. Deliver delays due to production issues at Boeing are being cited as a reason for lower capacity. The airport workers being offered buyouts include ramp agents, customer service agents, cargo workers and operations agents. Apart from the voluntary separation packages, the Dallas-based carrier is also offering an "employee time off" program in January that allows the concerned workers to take unpaid time off and return to their jobs later.
LUV currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
2. Riding on the buoyant air travel demand scenario, total traffic (measured by revenue passenger miles) at Copa Holdings increased 6.5% year over year in October. Capacity (measured by available seat miles) increased 6.6%, highlighting the rosy scenario with respect to operational expansion. CPA's September load factor (percentage of seats filled with passengers) was a solid 87.4%, reflecting operational efficiency in managing increased capacity while sustaining passenger loads.
3. With its stock nosediving, Spirit Airlines, in a filing with the SEC, has informed that it cannot file the third-quarter 2024 earnings report . The ailing ultra-low-cost carrier has been dealt a blow by the halt in merger-related talks with Frontier. Spirit is still in talks with creditors to explore ways of improving liquidity.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
The NYSE ARCA Airline Index decreased 4.5% to $68.6 in the past week, as most stocks in the table above traded in the red. Over the past six months, the NYSE ARCA Airline Index has risen 7.3%.
What’s Next in the Airline Space?
Investors would look forward to the third-quarter 2024 earnings report of Copa Holdings, scheduled for Nov. 20. On the non-earnings front, a few October traffic reports are expected in the coming days.
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Copa Holdings October 2024 Traffic Improves Year Over Year
Copa Holdings, S.A. CPA reported traffic numbers for October 2024 on the back of upbeat air-travel demand. Driven by high passenger volumes, revenue passenger miles (a measure of traffic) improved on a year-over-year basis in October.
To match the demand swell, CPA is increasing its capacity. In October, available seat miles (a measure of capacity) increased 6.6% year over year. Revenue passenger miles increased 6.5% year over year. Although traffic improved on a year-over-year basis, it failed to outpace capacity expansion. As a result, the load factor (percentage of seats filled by passengers) fell to 87.4% from 87.6% in October 2023.
Apart from Copa Holdings, we found another airline company, Ryanair Holdings RYAAY, aEuropean carrier, also reported impressive traffic numbers for October 2024.
The number of passengers transported on Ryanair flights was 18.3 million in October 2024, reflecting a 7% year-over-year increase. The October load factor (percentage of seats filled by passengers) of 93% remained flat on a year-over-year basis, reflecting consistent passenger demand for the airline's services. RYAAY operated more than 103,200 flights in October 2024.
To meet the upbeat demand, Ryanair expects its traffic view to grow 8% on a year-over-year basis for fiscal 2025, subject to no worsening of current Boeing delivery delays.
CPA’s Zacks Rank & Price Performance
CPA currently carries a Zacks Rank #2 (Buy).
Shares of CPA have gained 10.6% over the past three months compared with 18% growth of the Zacks Airline industry.
Three-Month Price Comparison
Other Stocks to Consider
Some other top-ranked stocks from the Zacks Transportation sector are C.H. Robinson Worldwide (CHRW) and Expeditors International of Washington, Inc. (EXPD). Each stock presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CHRW has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters (missed the mark in the remaining quarter), delivering an average surprise of 10.29%.
CHRW has an expected earnings growth rate of 32.42% for 2024. The Zacks Consensus Estimate for CHRW 2024 earnings has been revised 7.3% upward over the past 90 days. Shares of CHRW have gained 26.2% so far this year.
EXPD has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters (missed the mark in the remaining quarter and met in the other quarter), delivering an average surprise of 4.75%.
The Zacks Consensus Estimate for EXPD’s 2024 earnings has been revised 6.4% upward over the past 90 days. EXPD has an expected earnings growth rate of 5.79% for 2024. Shares of EXPD have gained 58.5% so far this year.
Zacks Investment Research
Risk Warnings and Disclaimers
You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.
You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.
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