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Here's Why Azul (AZUL) Stock Plummets 86% in the Past 90 Days

Zacks Equity Research

Shares of Azul AZUL have tumbled 85.8% compared with the industry’s 62.3% decline in the past three months.


Echoing the plight of most of its peers, Azul has been badly affected by deflated air-travel demand due to the coronavirus outbreak, which dimmed its earnings prospects in the process.

Azul reported wider-than-expected loss for first-quarter 2020, mainly due to the coronavirus-induced drop in demand. With capacity expansion outpacing traffic growth, consolidated load factor (percentage of seats filled with passengers) deteriorated 90 basis points to 81% in the quarter.

Moreover, due to waning travel demand, Azul reported a 90% decline in consolidated traffic (measured in revenue passenger kilometers or RPKs).Consolidated capacity (measured in available seat kilometers/ASKs) dropped 87.7%. Meanwhile, consolidated load factor (% of seats filled by passengers) decreased 15.6 percentage points to 68.8%.Similarly, the first-quarter load factor of Latin American carrier Copa Holdings CPA, which carries a Zacks Rank #3 (Hold), contracted 190 basis points to 81.5%.

For the April-June period, Azul expects to reduce 75-85% of capacity year over year. In May and June, the company expects a net cash burn rate of R$3-R$4 million per day. The Zacks Consensus Estimate for the stock’s current-year loss is pegged at 30 cents per share. While the same consensus mark was of earnings of $2.3 per share 60 days ago. This estimate revision in the opposite direction is indicative of the pessimism surrounding the Zacks Rank #4 (Sell) stock.

Due to the ongoing unprecedented crisis triggered by the coronavirus pandemic, a high proportion of employees at Azul as well as at its Zacks Rank #3 Latin American rival Gol Linhas GOL is on forced unpaid leave. Moreover, per a Reuters report, another Zacks #3 Ranked South-American carrier, LATAM Airlines Group LTM, will lay off its workforce by 1400 due to prevalent situation.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
 
LATAM Airlines Group S.A. (LTM) : Free Stock Analysis Report
 
AZUL SA (AZUL) : Free Stock Analysis Report
 
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