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GOL Linhas Stock Skyrockets on Robust June Traffic Report

Zacks Equity Research

Shares of GOL Linhas Aéreas Inteligentes GOL gained significantly on Jul 5, touching a 52-week high of $21.76 during the course of trading. However, this Zacks Rank #2 (Buy) stock retraced a bit to close the trading session at $21, up 17.2% over Jul 3’s closing price. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Catalyst

GOL Linhas’ solid performance can be attributed to its robust traffic report for June. Driven by strong demand for air travel, the company’s consolidated traffic (measured in revenue passenger kilometers (RPK)), climbed 14.4% to 3.22 billion. While international RPK surged in excess of 100%, domestic RPK grew 6.5% in the month.

On a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) expanded 7% to 3.88 billion, primarily on 78.1% rise in international capacity. Consolidated load factor, percentage of seats filled by passengers, improved to 83% from 77.6% a year ago as traffic growth exceeded capacity expansion. While load factor increased 13.4 percentage points to 75.5% internationally, it improved 5.2 percentage points to 84.3% domestically.

On a consolidated basis, this Latin American carrier increased the number of departures by 4.6% in the month. While international departures surged 75.9% in June, the metric increased 1.4% on the domestic front. Additionally, on-time departures at this Brazilian company were 93.8% in the month compared with 92.4% a year ago.

Notably, GOL Linhas’ impressive traffic numbers are not limited to June. On a year-to-date basis, consolidated load factor improved 2.3 percentage points to 81.7%, with traffic growth (8.7%) outpacing capacity expansion (5.7%).

In fact, the stock’s impressive price performance in the first half of the year reflects its robust traffic numbers during the first six months of 2019. In the January-June period, GOL Linhas has gained 24.6% compared with its industry’s 7.1% growth.

Price Performance in 1H19

Other Latin American Carriers That Rallied

GOL Linhas apart, some other carriers in the Latin American aviation space also made hay on Jul 5. While Brazilian carrier Azul AZUL gained 12.4%, Copa Holdings CPA appreciated 7.5%. Like GOL Linhas, shares of Azul and Copa Holdings too touched 52-week highs of $38.3 and $104.97, respectively, during the day.

Similar to GOL Linhas, the uptick in Azul’s share price was due to its strong traffic report for June backed by robust demand for air travel. The carrier’s CEO, John Rodgerson, said that "Changing competitive dynamics in the Brazilian airline sector combined with the organic growth of our network resulted in strong traffic results for the month of June."

Copa Holdings’ gain can be attributed to improvements in the Latin American economy that has boosted air travel demand. Apart from the uptick in demand, the suspension of Avianca Holdings' AVH Brazilian operations by the country’s civil aviation regulator National Civil Aviation Agency in May is aiding its rivals in the Latin American aviation industry. The regulatory body took the decision as Avianca had filed for bankruptcy in 2018.

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Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
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