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Azul's (AZUL) Q3 Loss Wider Than Expected, Revenues Lag
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Azul (AZUL - Free Report) incurred a loss (excluding a penny from non-recurring items) of $1.99 per share in the third quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $1.05. In the year-ago period, the company had reported adjusted earnings of 92 cents per share. The third-quarter results were affected by coronavirus-induced drop in demand and depreciation of the Brazilian real.
Moreover, total revenues of $149.8 million missed the Zacks Consensus Estimate of $165 million. The top line also declined more than 70% year over year with passenger revenues (accounted for 77.5% of the top line) plunging 78.4% due to the coronavirus-led weak air-travel demand. Cargo and other revenues surged 26.6% year over year primarily due to strong e-commerce growth.
Consolidated revenue passenger kilometers (“RPK”), measuring revenues generated per kilometer per passenger, fell 69% year over year. The metric declined 62.3% domestically and 89.6% internationally.
Consolidated available seat kilometers (“ASK”), measuring an airline's passenger-carrying capacity, decreased 66.6% year over year. While domestic capacity dropped 60.1%, international capacity contracted 88%.
With traffic declining more than the amount of capacity contraction, consolidated load factor (percentage of seats filled with passengers) deteriorated 590 basis points to 78.4%.
While total revenues per ASK, or RASK, decreased 20.3%, passenger revenues per ASK, or PRASK, fell 35.2%. Meanwhile, cost per ASK (“CASK”) soared 78.6% on 35.4% depreciation in the Brazilian real. Jet fuel prices declined 12.6% year over year. CASK, excluding fuel, augmented more than 100%. Average fare decreased 33% from the year-ago quarter’s figure.
Azul exited the third quarter with total passenger operating fleet of 139 aircraft. The average age of the fleet was 6 years. Contractual fleet size was 165.
Liquidity
Azul, carrying a Zacks Rank #4 (Sell), exited the third quarter with total liquidity of R$6.95 billion, up 4.6% year over year. Additionally, total debt decreased 4.8% to R$18 billion from the June-end figure due to 7.5% reduction in lease liabilities.
Outlook
With air-travel demand steadily recovering in Brazil, Azul expects its domestic capacity to be more than 80% of the 2019 level in December. Meanwhile total capacity is anticipated to be approximately 70% of the 2019 level in the same month. This compares with a capacity of around 60% of the year-ago level estimated previously. By the end of 2020, the airline plans to operate in 113 destinations, thus resuming services on 97% of its network.
The company forecasts average daily cash burn to be R$1.5 million in the fourth quarter of 2020. Previously it expected the same to be R$2.5 million.
Performance of Other Airline Stocks
Spirit Airlines Inc. (SAVE - Free Report) , carrying a Zacks Rank #3 (Hold), incurred a loss of $2.32 per share (excluding $1.25 from non-recurring items) in the June quarter, narrower than the Zacks Consensus Estimate of a loss of $2.63. Meanwhile, operating revenues of $401.9 million beat the Zacks Consensus Estimate of $384.7 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Southwest Airlines Co. (LUV - Free Report) , carrying a Zacks Rank #3, incurred a loss of $1.99 per share (excluding 3 cents from non-recurring items) in the third quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of $2.44. Moreover, operating revenues of $1,793 million surpassed the Zacks Consensus Estimate of $1,678.2 million.
SkyWest Inc (SKYW - Free Report) , carrying a Zacks Rank #4, reported earnings of 66 cents per share, surpassing the Zacks Consensus Estimate of 9 cents. Quarterly revenues of $457.5 million surpassed the Zacks Consensus Estimate of $426.8 million.
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Azul's (AZUL) Q3 Loss Wider Than Expected, Revenues Lag
Azul (AZUL - Free Report) incurred a loss (excluding a penny from non-recurring items) of $1.99 per share in the third quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $1.05. In the year-ago period, the company had reported adjusted earnings of 92 cents per share. The third-quarter results were affected by coronavirus-induced drop in demand and depreciation of the Brazilian real.
Moreover, total revenues of $149.8 million missed the Zacks Consensus Estimate of $165 million. The top line also declined more than 70% year over year with passenger revenues (accounted for 77.5% of the top line) plunging 78.4% due to the coronavirus-led weak air-travel demand. Cargo and other revenues surged 26.6% year over year primarily due to strong e-commerce growth.
AZUL SA Price, Consensus and EPS Surprise
AZUL SA price-consensus-eps-surprise-chart | AZUL SA Quote
Operational Statistics
Consolidated revenue passenger kilometers (“RPK”), measuring revenues generated per kilometer per passenger, fell 69% year over year. The metric declined 62.3% domestically and 89.6% internationally.
Consolidated available seat kilometers (“ASK”), measuring an airline's passenger-carrying capacity, decreased 66.6% year over year. While domestic capacity dropped 60.1%, international capacity contracted 88%.
With traffic declining more than the amount of capacity contraction, consolidated load factor (percentage of seats filled with passengers) deteriorated 590 basis points to 78.4%.
While total revenues per ASK, or RASK, decreased 20.3%, passenger revenues per ASK, or PRASK, fell 35.2%. Meanwhile, cost per ASK (“CASK”) soared 78.6% on 35.4% depreciation in the Brazilian real. Jet fuel prices declined 12.6% year over year. CASK, excluding fuel, augmented more than 100%. Average fare decreased 33% from the year-ago quarter’s figure.
Azul exited the third quarter with total passenger operating fleet of 139 aircraft. The average age of the fleet was 6 years. Contractual fleet size was 165.
Liquidity
Azul, carrying a Zacks Rank #4 (Sell), exited the third quarter with total liquidity of R$6.95 billion, up 4.6% year over year. Additionally, total debt decreased 4.8% to R$18 billion from the June-end figure due to 7.5% reduction in lease liabilities.
Outlook
With air-travel demand steadily recovering in Brazil, Azul expects its domestic capacity to be more than 80% of the 2019 level in December. Meanwhile total capacity is anticipated to be approximately 70% of the 2019 level in the same month. This compares with a capacity of around 60% of the year-ago level estimated previously. By the end of 2020, the airline plans to operate in 113 destinations, thus resuming services on 97% of its network.
The company forecasts average daily cash burn to be R$1.5 million in the fourth quarter of 2020. Previously it expected the same to be R$2.5 million.
Performance of Other Airline Stocks
Spirit Airlines Inc. (SAVE - Free Report) , carrying a Zacks Rank #3 (Hold), incurred a loss of $2.32 per share (excluding $1.25 from non-recurring items) in the June quarter, narrower than the Zacks Consensus Estimate of a loss of $2.63. Meanwhile, operating revenues of $401.9 million beat the Zacks Consensus Estimate of $384.7 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Southwest Airlines Co. (LUV - Free Report) , carrying a Zacks Rank #3, incurred a loss of $1.99 per share (excluding 3 cents from non-recurring items) in the third quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of $2.44. Moreover, operating revenues of $1,793 million surpassed the Zacks Consensus Estimate of $1,678.2 million.
SkyWest Inc (SKYW - Free Report) , carrying a Zacks Rank #4, reported earnings of 66 cents per share, surpassing the Zacks Consensus Estimate of 9 cents. Quarterly revenues of $457.5 million surpassed the Zacks Consensus Estimate of $426.8 million.
Legal Marijuana: An Investor’s Dream
Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
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