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What's in the Offing for Azul (AZUL) This Earnings Season?

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Azul S.A.(AZUL - Free Report) is slated to report third-quarter 2020 financial numbers on Nov 16, before market open.

Azul has a mixed earnings record. The carrier’s bottom line outperformed the Zacks Consensus Estimate in two of the last four quarters (missing estimates in the other two), the average miss being 71%.

AZUL SA Price and EPS Surprise

AZUL SA Price and EPS Surprise

AZUL SA price-eps-surprise | AZUL SA Quote

Moreover, the Zacks Consensus Estimate for the to-be-reported quarter’s bottom line is currently pegged at a loss of $1.11, wider than the loss of 68 cents per share 60 days ago.

Against this backdrop, let’s discuss the factors that are likely to get reflected on the upcoming quarterly results.

Despite the recent improvement in air-travel demand, passenger revenues, which account for the bulk of the company’s top line, are still way below the year-ago levels, thanks to the coronavirus pandemic. Consequently, lower passenger revenues are likely to have hurt the company’s top line in the to-be-reported quarter.

Load factor (% of seats filled by passengers) is also expected to have declined on a year-over-year basis due to tepid air-travel demand. Also, depreciation of the Brazilian currency might have negatively impacted the company’s third-quarter performance. However, cargo revenues are likely to have increased in the third quarter owing to the company’s deepened focus on its cargo division in the face of passenger revenue weakness.

Moreover, low fuel costs are expected to have boosted the third-quarter bottom-line performance of Azul, which competes with the likes of Copa Holdings (CPA - Free Report) and Gol Linhas in the Latin American aviation space.

What Does the Zacks Model Say?

Our proven model does not predict a bottom-line outperformance for Azul this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. But that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Azul has an Earnings ESP of -12.61%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Azul carries a Zacks Rank #4 (Sell), currently.

Highlights of Q2

Azul incurred a loss of $2.38 per share (excluding $2.33 from non-recurring items) in the second quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $1.11. The second-quarter results were affected by coronavirus-induced drop in demand and a 38% depreciation in the Brazilian real. Notably, total revenues of $74.9 million not only lagged the Zacks Consensus Estimate of $103.4 million but also plunged 88.9% year over year.

Results of a Q3 Sectorial Outperformer

Investors interested in the broader Transportation sector may also want to recapitulate the third-quarter results of a company, earnings of which surpassed estimates.

United Parcel Service’s (UPS - Free Report) third-quarter 2020 earnings (excluding 4 cents from non-recurring items) per share of $2.28 surpassed the Zacks Consensus Estimate of $1.86. The bottom line also improved 10.1% year over year. UPS, currently carrying a Zacks Rank #2 (Buy), generated revenues worth $21,238 million in the quarter, outpacing the Zacks Consensus Estimate of $20,079.6 million.

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