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What's in Store for Avianca (AVH) This Earnings Season? (Revised)

Zacks Equity Research

Shares of Avianca Holdings AVH have declined more than 15% so far this year due to multiple headwinds. Notably, this Latin-American carrier is expected to post earnings of 9 cents per share in first-quarter 2019, mirroring a 59.1% decline year over year. Revenues are expected to come in at $1.28 billion, up 9.4% from the year-ago quarter.

Factors Likely at Play

Passenger revenues, which account for bulk of the top line, are expected to increase on account of strong demand for air travel and boost the company’s top-line in the first quarter. Growing tourism in Colombia, where Avianca is a dominant player, is anticipated to drive the carrier’s passenger revenues in the to-be-reported quarter. Increase in ticket prices are also likely to aid revenue growth in the quarter.

However, with oil prices on an upswing this year, operating expenses are likely to increase and hurt the bottom line. Expenses on aircraft rental are also expected to increase mainly due to the addition of new planes in line with its fleet modernization efforts. Ground expenses are too likely to increase mainly owing to higher navigation.

These apart, we expect an update on BRW Aviation’s (a controlling shareholder of Avianca), default under a loan agreement with United Airlines — a wholly owned subsidiary of United Continental Holdings UAL.

Estimate Revisions Trend & Surprise History

Investors should note that the earnings estimate revisions depicts a stable picture ahead of its earnings release. The Zacks Consensus Estimate for Avianca Holdings’ first-quarter earnings has remained unchanged over the past 60 days.

Additionally, Avianca Holdings does not have an impressive track record with respect to earnings per share. The carrier, which competes with the likes of GOL Linhas GOL in the Latin-American aviation space, surpassed the Zacks Consensus Estimate only once in the trailing four reported quarters. It posted in-line earnings in two quarters and missed the consensus mark in another.

Avianca Holdings S.A. Price and EPS Surprise

 

Avianca Holdings S.A. Price and EPS Surprise

Avianca Holdings S.A. price-eps-surprise | Avianca Holdings S.A. Quote

What Does the Zacks Model Say?

Our model indicates that Avianca Holdings might not beat on earnings in the to-be-reported quarter. 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: Avianca Holdings has an Earnings ESP of 0.00%. The Most Accurate Estimate is in line with the Zacks Consensus Estimate.

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

Key Pick

Investors interested in the Zacks Transportation sector may consider Teekay Tankers TNK as it possesses the right combination of elements to beat on earnings in its next quarterly release.

Teekay Tankers, scheduled to release first-quarter 2019 results on May 23, has an Earnings ESP of +33.33% and a Zacks Rank of 3.

(We are reissuing this article to correct a mistake. The original article, issued on May 8, 2019, should no longer be relied upon.)


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