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TAM Revs Up On Passenger Demand

Zacks Equity Research

On February 13, 2012, TAM S.A (NYSE:TAM - News) reported its financial results for the fourth quarter and fiscal 2011. The company reported a net income of R$95.5 million (US$53.4 million) in the quarter, down 36.4% from R$150.1 million (US$88.8million) in the year-ago quarter.

Earnings per share were recorded at R$0.6 per share (US$0.34 per ADR) compared with R$1.0 per share (US$0.59 per ADR) reported in the year-ago quarter.

For FY11, the company reported net loss of R$2.1(US$1.3 per ADR) per share versus earnings per share of R$4.1(US$2.3 per ADR) reported in fiscal 2010.

In the fourth quarter, net revenue was R$3,579.3 million (US$1,999.6 million), up 11% year over year and 7.8% sequentially. The year-over-year improvement was primarily due to rising passenger demand across the company’s domestic and international route network.

Passenger revenues and the overall cargo revenues in the fourth quarter reached R$ 2,712.6 million (US$1,515.4 million) and R$ 330.2 million (US$184.5 million), representing year-over-year growth of 12.4% and 11.6%, respectively.

For FY11, the company reported total revenue of R$ 13,555.8 million (US$8117.2 million) in the quarter, up 14.2% y/y.

Total operating expenses in the fourth quarter increased 9.1% year over year and 18.6% sequentially to R$ 3,281.4 million (US$1,833.2 million). Rising cost of fuel, personnel, marketing expenses and third party services continue to raise expenses for the company.

EBITDA in the fourth quarter was R$ 485.9 million (US$271.5 million), up 23.3% y/y, with a margin of 13.6% compared with 12.2% in the corresponding quarter of 2010.

For full-year 2011, EBITDA improved to R$1,707.4 million (US$1,022.4 million), up 1.8% year over year.

Exiting the fourth quarter, financial liability was recorded at R$1,998.0 million (US$1,057.1million) versus R$1,865.5 million (US$1,019.4 million) in the previous quarter. Cash and cash equivalents were recorded at R$650.1 million (US$344 million) versus R$515 million (US$281.4 million) in the prior-year quarter.

During the quarter, net cash generated from operating activities was R$ 535.8 million (US$321.1 million), up from R$227 million (US$134.3 million) recorded in the year-ago quarter. Purchases of property, plant and equipment were recorded at a negative R$57.4 million (US$32.1 million) compared with R$15.0 million (US$8.9 million), in the year-ago quarter.

TAM S.A., operating through its subsidiaries TAM Linhas Aéreas and TAM Mercosur, is a renowned air transportation services provider, both in the domestic and international markets. TAM competes directly with its peers, such as AMR Corporation (:AMR) and GOL Linhas A (NYSE:GOL - News).

The company holds a positive outlook for 2012, with an increase in seating capacity within Brazil as well as among international routes. Management targets a load factor between 72% and 74% in the domestic segment and between 83% and 85% in the international segment, which looks impressive.

Tam S.A has a Zacks #2 Rank, which translates into a short-term Buy rating (1-3 months).

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