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Rising Travel Demand Aids Gol Linhas (GOL) Amid High Debt

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We have recently updated a report on Gol Linhas Aéreas Inteligentes S.A. (GOL - Free Report) .

Gol Linhas has an impressive Growth Score of A. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of quality and sustainability of growth.   

Air-travel demand is slowly picking up in Brazil owing to the increased roll-out of vaccines by Brazil's National Program for Immunization. As a result, the top line surged year over year in third-quarter 2021 with passenger revenues (contributing 92.3% to total revenues) rising more than 100%. Top-line growth is likely to be healthy in fourth-quarter 2021 as well.

With travel demand continuing to improve in Brazil on the back of high vaccination rates, Gol Linhas expects demand to increase 26% in the fourth quarter of 2021 from the year-ago quarter’s level and 33% sequentially. In response to this expectation, the company plans to increase capacity by 29% in the current quarter from the comparable period in 2020. The carrier expects the load factor (percentage of seats filled by passengers) to be 82% in the fourth quarter.

Despite the recent improvement in air-travel demand, the same continues to be well below pre-coronavirus levels. Total departures in the September quarter were only 53% of pre-pandemic levels, despite improving significantly year over year.  Gol Linhas transported 48.5% less passengers in third-quarter 2021 from third-quarter 2019 levels.

At the end of the third quarter, Gol Linhas’ cash and cash equivalents stood at $258 million, lower than the current debt of $354 million. This implies that the company does not have enough cash to meet its short-term debt obligations. Its current ratio was pegged at 0.25 at the end of the September quarter. A current ratio of less than 1 (current liabilities exceeding current assets) is not desirable as it indicates that the company may have problems meeting short-term obligations.

Zacks Rank & Stocks to Consider

Gol Linhas carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Investors interested in the broader Zacks Transportation sector can also consider stocks like Knight-Swift Transportation Holdings Inc. (KNX - Free Report) , Landstar System, Inc. (LSTR - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) .

The long-term expected earnings per share (three to five years) growth rate for Knight-Swift is pegged at 15%. KNX is benefitting from an improvement in the adjusted operating ratio. Notably, the adjusted operating ratio improved to 82.8% in the first nine months of 2021 compared with 86.6% reported in the first nine months of 2020. In third-quarter 2021, the metric improved to 81.3% from 83.9% a year ago.  

The uptick in adjusted operating ratio is primarily driven by higher revenues in the Trucking, Logistics and Intermodal segments. Lower the value of the metric, the better. The stock has returned 39.2% in the past year. Knight-Swift currently sports a Zacks Rank #1.

The long-term expected earnings per share (three to five years) growth rate for Landstar is pegged at 12%. LSTR is benefitting from a gradual recovery in the economy, freight market conditions in the United States.

LSTR’s top and the bottom lines increased substantially in each quarter from the third quarter of 2020, owing to robust revenues generated in the primary segment — truck transportation. The stock has rallied 32.6% in the past year. Landstar currently carries a Zacks Rank #2 (Buy).

The long-term expected earnings per share (three to five years) growth rate for C.H. Robinson is pegged at 4.4%. CHRW is benefitting from higher pricing and volumes across most of its service lines. Total revenues rose 42.4% year over year in the first nine months of 2021, with higher revenues across all segments.

CHRW’s measures to reward its shareholders are encouraging. Despite the tailwinds, the stock has increased negligibly in the past month. C.H. Robinson currently sports a Zacks Rank #1.