GOL Linhas Aereas Inteligentes S.A.

GOL Linhas Aéreas Inteligentes S.A. (GOL - Analyst Report) is finding profit in being Brazil's largest low-cost airline. The company has surprised on estimates the last 2 quarters. The stock is cheap, trading at 9.7x forward earnings.

Company Description

GOL is a low-cost Brazilian airline. It operates 110 737 aircraft and connects all of Brazil's cities to South America. The company's frequent flier program, with 6 million members, is the largest in South America.

As of the end of the second quarter of 2009, GOL offered 800 daily flights to 49 destinations.

GOL Surprised by 382.35% in the Second Quarter

On Aug 11, GOL reported second quarter results of 82 cents per share which far surpassed the Zacks Consensus Estimate of 17 cents.

Net income climbed to R$353.7mm from a loss of R$166.55mm in the second quarter of 2008.

Revenues, however, fell 4.8% to R$1.394mm compared to R$1.464mm in the year ago period. Domestic flight demand in the Brazilian market, measured by revenue passenger kilometers (domestic RPK) grew by 1.8%. Over the first six months of the year, it jumped 3.1% but the company believes that real demand growth was flat due to the increase of low-fare seats supply and introductory fares.

During the quarter, GOL also entered into 2 new code share agreements with AirFrance-KLM in April and American Airlines in July. The agreements are part of GOL's strategy to allow its customers to travel to more international destinations using frequent flyer miles.

The company also launched Gollog Express, a new door-to-door delivery service in the express cargo market, which is a growing profit area.

Zacks Consensus Estimates Soar

Analysts are certainly bullish on 2009 for the company.

The third quarter Zacks Consensus Estimate jumped 10 cents to 27 cents in the last 60 days.

2 out of 4 covering analysts have raised 2009 estimates in the last 30 days as the full-year Zacks Consensus Estimate surged 122% to $1.02 from 46 cents per share in the last 2 months. Analysts now expect year over year earnings growth in 2009 of 140.04%.

Value Fundamentals

GOL is a Zacks #1 Rank (strong buy) stock. It has a price-to-book of 1.38. The company has a solid 5-year average return on equity (ROE) of 11.48%.

Additionally, investors get rewarded with a dividend currently yielding 1.10%.