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Will Passenger Revenues Boost Azul's (AZUL) Q1 Earnings?

Zacks Equity Research

Azul AZUL is scheduled to release its first-quarter 2019 financial numbers on May 9, before market open. The Zacks Consensus Estimate for earnings and revenues is pegged at 43 cents and $694.12 million, respectively.

In the last reported quarter, this Latin-American airline company’s earnings per ADS of 31 cents fell short of the Zacks Consensus Estimate by 18 cents. The bottom line also plunged on a year-over-year basis. This downturn was due to high fuel costs and devaluation of the Brazilian Real. While the fuel price per liter surged 37.2%, the Brazilian Real depreciated 17.3% year over year. Notably, this marked the only earnings miss in the trailing four reported quarters.

AZUL SA Price and EPS Surprise


AZUL SA Price and EPS Surprise | AZUL SA Quote

Investors will be hoping that Azul brushes aside the disappointment of the fourth quarter of 2018 and surpasses the earnings estimate in the soon-to-be-reported quarter.

However, our model indicates that the company might not beat on earnings in first-quarter 2019. This is because a stock needs to have — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Azul has an Earnings ESP of 0.00%. The Most Accurate Estimate is in line with the Zacks Consensus Estimate.

Zacks Rank: Azul carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let’s delve deeper and find out the factors likely to impact Azul’s quarterly results.

We expect upbeat passenger revenues to boost this Latin-American company’s top line in the soon-to-be-reported quarterbacked by solid demand for air travel mainly on the domestic front. Load factor (% of seats filled by passengers) is anticipated to increase as traffic growth outpaced capacity expansion in the three-month period.

Favorable air fares are also likely to drive revenues in the quarter. However, factors like unfavorable currency fluctuations are likely to hurt Azul’s first-quarter results as was the case with another Latin-American carrier, GOL Linhas GOL, whose first quarter results were announced on Apr 30.Also, high fuel costs are likely to hurt Azul’s bottom line in the soon-to-be-reported quarter.

Moreover, in March 2019, Azul entered into a non-binding agreement with Avianca Brasil to acquire some of its assets for $105 million. Currently, Avianca Brasil is operating under bankruptcy court protection on fears of aircraft repossession following outstanding payments to aircraft lessors. We expect a detailed update on the issue on Azul’s first-quarter conference call.

Upcoming Releases

Investors interested in the broader Zacks Airline industry are keenly awaiting the first-quarter 2019 earnings report of another Latin-American carrier, Copa Holdings CPA, on May 8.

Key Pick

Investors interested in the Zacks Transportation sector may consider Expeditors International of Washington EXPD as it possesses the right combination of elements to beat on earnings in its next quarterly release.

Expeditors, scheduled to report first-quarter 2019 results on May 7, has an Earnings ESP of +0.47% and a Zacks Rank of 3.

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Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
Expeditors International of Washington, Inc. (EXPD) : Free Stock Analysis Report
AZUL SA (AZUL) : Free Stock Analysis Report
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