Shares of Gol Linhas have displayed an uptrend on the bourses over the past month, gaining 16.2% against its industry’s 3.1% decline.

Image Source: Zacks Investment Research

Let’s analyze the reasons for this outperformance.

The gradual improvement in air-travel demand in Brazil is a huge positive for Gol Linhas.  Upbeat air-travel demand is boosting GOL’s traffic. Evidently, consolidated traffic for January rose 25.2% year over year. To match the increased demand situation, GOL is expanding capacity. In the same month, capacity expanded 26.2% year over year. GOL carried 27.3% more passengers last month from the year-ago levels.

Upbeat traffic in its domestic markets is leading to the rosy scenario on a consolidated basis. In January, domestic traffic and capacity improved 21.5% and 22.2%, respectively. On the domestic front, 25.6% more passengers boarded GOL’s flights in January 2022.

Owing to the improved demand scenario, last month, Gol Linhas provided a rosy outlook for the fourth quarter (detailed results will be out on Feb 17). GOL expects demand to rise 15.4% year over year in the December quarter. EBITDA margin is expected to be approximately 35% in the fourth quarter, while EBIT margin of around 28% is anticipated in the period.

If Gol Linhas manages to beat on earnings in the fourth quarter, driven by upbeat traffic, the stock might move further northward. An earnings beat generally leads to stock price appreciation.

The proven Zacks model predicts a bottom-line outperformance for Gol Linhas in fourth-quarter 2021. The combination of a positive  Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings surprise, which is the case here. This is because GOL has an earnings ESP of +8.29% and a Zacks Rank #3, currently. You can uncover the best stocks to buy or sell before they’re reported with our  Earnings ESP Filter.

Moreover, Gol Linhas’ Growth Score of B highlights the stock’s potential and a further share price rally.

Stocks to Consider

Investors interested in the Zacks Transportation sector may consider Atlas Air Worldwide Holdings , Danaos Corporation (DAC Quick QuoteDAC - Free Report) and GATX Corporation (GATX Quick QuoteGATX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Atlas Air Worldwide Holdings is the parent company of Atlas Air and Polar Air Cargo, which together operate a fleet of freighter aircraft. AAWW is primarily involved in the airport-to-airport air transportation of heavy freight. AAWW is being supported by strong demand for air freight amid the coronavirus pandemic. The boom in e-commerce trends amid the current scenario is a catalyst.

Over the past 60 days, Atlas Air has seen the Zacks Consensus Estimate for 2022 earnings being revised 8.1% upward. The AAWW stock has appreciated 43.3% in a year’s time. 

Danaos is being aided by the bullishness surrounding the containership market. The gradual resumption of economic activities also bodes well for Danaos.

Over the past 60 days, Danaos has seen the Zacks Consensus Estimate for 2022 earnings being revised 39.9% upward. Shares of DAC have appreciated more than 100% in a year’s time. 

Based in Chicago, IL, GATX is a global railcar lessor with owned fleets in North America, Europe and Asia. Continued recovery in the North American railcar leasing market is expected to drive growth in 2022. Improved market lease rates and higher asset disposition gains are anticipated to boost profits at the Rail North America segment, which contributes to the bulk of the top line.

Shares of GATX have gained 6% in a year. The Zacks Consensus Estimate for GATX’s 2022 earnings has been revised 5.9% upward in the past 60 days.