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LATAM Airlines Up 2% Since Q2 Earnings Release: Here's Why

Zacks Equity Research

Ever since LATAM Airlines’ LTM second-quarter 2019 earnings released on Aug 13, its shares have increased 1.9% despite the company reporting lower-than-expected revenues.

 

Let’s take a detailed look into the company’s second-quarter 2019 results.

The Latin-American carrier incurred a loss of 10 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 13 cents. In second-quarter 2018, the company had incurred a loss of 19 cents. The narrower-than-expected loss can be attributed to the uptick in passenger revenues, a decline in non-fuel unit costs and favorable foreign currency movements.

Total revenues increased year over year to $2,288.9 million but missed the Zacks Consensus Estimate of $2,376.2 million. The year-over-year improvement was owing to a 3.2% rise in passenger revenues, which accounted for 85.2% of the top line. During the quarter, more than 16.8 million passengers (up 8.3%) opted to fly with LATAM Airlines and its subsidiaries. The uptick was mainly due to strong performances at the carrier’s domestic markets. Cargo revenues, however, declined 10.2% in the quarter.

Operating expenses increased 1.1% year over year. Also, fuel costs increased 5.2% owing to a 6.7% rise in fuel consumption. Excluding fuel costs, cost per available seat mile (CASK) declined 5.2% due to the company’s cost-reduction efforts. Load factor (% of seats filled by passengers) improved 1.1 percentage points to 83.3% as consolidated traffic growth (7.1%) outweighed the capacity expansion (4.8%).

Meanwhile, expenses on wages and benefits decreased 0.8% owing to a 2.7% decline in the average headcount. The carrier exited the second quarter with cash and cash equivalents of $1,381 million compared with $1,081.64 million at the end of 2018. LATAM Airlines, which competes with the likes of Copa Holdings CPA, GOL Linhas GOL and Azul AZUL in the Latin-American aviation space, had a total net debt of $7,716.72 million at the end of the second quarter compared with $7,261.73 million at 2018 end.

LATAM Airlines, carrying a Zacks Rank #3 (Hold), still expects to end 2019 with an operating fleet of 328. The same is expected to increase to 330 and 335 at the end of 2020 and 2021, respectively. For 2019, operating margin is still anticipated to be between 7% and 9%. Also, capacity growth (ASKs) is still estimated in the 3-5% range for the current year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
 
Gol Linhas Aereas Inteligentes S.A. (GOL) : 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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