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Gol Linhas (GOL) Misses on Q1 Earnings, Tweaks '19 & '20 View

Zacks Equity Research

Gol Linhas Aereas Inteligentes S.A.'s GOL earnings (excluding 14 cents from non-recurring items) of 9 cents per share in the first quarter of 2019 missed the Zacks Consensus Estimate by 24 cents. Results were hurt by the 16.2% depreciation of the Brazilian real against the US dollar and high fuel costs.

Meanwhile, net revenues of R$3.2 billionimproved 8.3% year over year owing to solid demand for air travel and a strong pricing. Passenger revenues accounted for bulk (94.5%) of the top line and rose 8.4% on a year-over-year basis.

 Operational Statistics

Consolidated revenue passenger kilometers (RPK) — measure for revenues generated per kilometer per passenger — increased 6.4% year over year. The metric improved 4.6% and 18.5% each on the domestic and international front.

Consolidated available seat kilometers (ASK), measuring an airline's passenger carrying capacity, rose 5% year over year. While domestic capacity inched up 2.2%, international capacity expanded 23%.

Furthermore, the company’s total load factor (percentage of seats filled with passengers) was 81.5% compared with 80.4% in the year-ago period. The metric improved as traffic growth outpaced capacity expansion.

Average fares increased 1.3% in the quarter under review. While net passenger revenue per ASK climbed 3.3%, total revenue per ASK grew 3.2% year over year. Fuel price per liter increased 9.3%. Cost per ASK rose 4.7% year over year. The metric increased 3.2%, excluding fuel.

Gol Linhas Aereas Inteligentes S.A. Price and Consensus

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

Other Metrics

Gol Linhas, carrying a Zacks Rank #3 (Hold), exited the first quarter with a total liquidity (including cash and cash equivalents, financial investments, restricted cash and accounts receivable) of R$3.5 billion compared with R$3 billion at the end of 2018. Additionally, long-term debt totaled R$11.39 billion at the end of the reported quarter compared with R$10.61 billion at the end of 2018.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Total operating expenses increased 14.5% year over year to R$2.7 billion. The metric, excluding fuel, contracted 15.7% year over year. Total volume of departures decreased 1.1%, while the number of seats increased 3.2%.

2019 Outlook

GOL Linhas anticipates net revenues of approximately R$13 billion, compared with R$12.9 billion expected previously. Additionally, earnings are envisioned in the range of 70-90 cents per share. Previously, the estimate was in the band of $1.30-$1.50. The Zacks Consensus Estimate for the same stands at 61 cents. For fuel price, the forecast has been revised to R$3 per liter from R$2.8 per liter. Meanwhile, the prediction for pre-tax margin has been retained at 10%.

The capex anticipation has been increased to R$700 million from R$650 million. Also, the effective tax rate is projected to be 22% in the year compared with 20% predicted earlier. The company’s expected fleet size at the end of the year is anticipated between 124 and 127 (earlier expectation: 122-125). The prediction for capacity now stands at 7-10% compared with 6-10% projected earlier.

For average load factor, the forecast is still in the 79-81% range. The EBITDA margin prediction has also been retained at 28%.

2020 View

For 2020, the carrier anticipates fleet size to grow between 128 and 131 (earlier view was between 125 and 128). Additionally, capacity and load factor are still estimated to increase in the 7-10% and 79-81% range, respectively. The projection for total net revenues has been raised to R$14.5 billion from R$14.2 billion. For the effective tax rate, the prediction is now 22% compared with 20% projected earlier. Moreover, the company expects capex of R$650 million compared with R$600 million estimated earlier.

However, fuel price per liter is expected to be R$3.1 next year compared with the former estimate of R$2.9. Meanwhile, EBITDA margin forecast remains unchanged at 29%. Pre-tax margin is still projected to be at 12%. Further, earnings per share are now anticipated between $1 and $1.3 compared with $1.70 and $2, guided previously.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting earnings reports from key players such as like Hertz Global Holdings HTZ, Expeditors International of Washington EXPD and Air Lease Corporation AL. While Hertz Global will report first-quarter 2019 earnings on May 6, Expeditors and Air Lease will announce the same on May 7 and 9, respectively.

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