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Here's Why AZUL Deserves to be Retained in Your Portfolio
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Azul S.A. (AZUL - Free Report) seems to be benefiting from steady recovery in air-travel demand, on the domestic and international fronts. However, its bottom line seems to be affected by rising operational expenses, mainly fuel costs.
Let’s look at some other factors that make AZUL a stock to be retained in portfolios.
Azul has been seeing a steady rebound in air-travel demand, particularly in its domestic markets. Consolidated traffic and capacity increased 18% and 19.1% respectively, in first-quarter 2023 from the year-ago period’s levels. Azul’s international traffic and capacity surged more than 100% in the March-end quarter on a year-over-year basis.
With more people taking to the skies, Azul’s passenger revenues, contributing 93.1% to the top line, improved 46.7% year over year (on higher total capacity) in first-quarter 2023.
The carrier's fleet-modernization efforts are commendable. Azul operates most fuel-efficient and environment-friendly fleet in Brazil. Next-generation aircraft dominates its fleet. In first-quarter 2023, fuel consumption per available seat kilometers was down 4.4% from the year-ago levels.
Azul exited the first quarter of 2023, with a total passenger operating fleet of 182 aircraft. The average age of the fleet was 7.2 years. The contractual fleet size was 194.
AZUL currently carries a Zacks Rank #3 (Hold).
Some Risks
Total operating expenses rose 28.6% in first-quarter 2023 from the year-ago levels. The increase was due to a 40.7% rise in aircraft fuel. The current scenario of increasing fuel costs do not bode well for the airline. Such escalating operating expenses may hurt the bottom-line results.
Stocks to Consider
Investors interested in the Zacks Airline industry may consider the following better-ranked stocks.
American Airlines (AAL - Free Report) , which currently carries a Zacks Rank #2 (Buy), is being aided by the improved air-travel-demand situation. The carrier's debt-reduction efforts are impressive as well. Management aims to reduce its debt by $15 billion by 2025 end. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For the second quarter and 2023, AAL’s earnings are expected to register 65.8% and 440% growth, respectively, on a year-over-year basis.
Alaska Air Group (ALK - Free Report) , currently carrying a Zacks Rank #2, benefits from the improved air-travel-demand scenario. On the back of upbeat air-travel demand and favorable pricing, Alaska Air's top line increased 31% year over year in the March-end quarter. ALK expects to boost its fleet and workforce in 2023 to meet the anticipated high demand.
For the second quarter and 2023, ALK’s earnings are expected to register 12% and 44.8% improvements, respectively, on a year-over-year basis.
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Here's Why AZUL Deserves to be Retained in Your Portfolio
Azul S.A. (AZUL - Free Report) seems to be benefiting from steady recovery in air-travel demand, on the domestic and international fronts. However, its bottom line seems to be affected by rising operational expenses, mainly fuel costs.
Let’s look at some other factors that make AZUL a stock to be retained in portfolios.
Azul has been seeing a steady rebound in air-travel demand, particularly in its domestic markets. Consolidated traffic and capacity increased 18% and 19.1% respectively, in first-quarter 2023 from the year-ago period’s levels. Azul’s international traffic and capacity surged more than 100% in the March-end quarter on a year-over-year basis.
With more people taking to the skies, Azul’s passenger revenues, contributing 93.1% to the top line, improved 46.7% year over year (on higher total capacity) in first-quarter 2023.
The carrier's fleet-modernization efforts are commendable. Azul operates most fuel-efficient and environment-friendly fleet in Brazil. Next-generation aircraft dominates its fleet. In first-quarter 2023, fuel consumption per available seat kilometers was down 4.4% from the year-ago levels.
Azul exited the first quarter of 2023, with a total passenger operating fleet of 182 aircraft. The average age of the fleet was 7.2 years. The contractual fleet size was 194.
AZUL currently carries a Zacks Rank #3 (Hold).
Some Risks
Total operating expenses rose 28.6% in first-quarter 2023 from the year-ago levels. The increase was due to a 40.7% rise in aircraft fuel. The current scenario of increasing fuel costs do not bode well for the airline. Such escalating operating expenses may hurt the bottom-line results.
Stocks to Consider
Investors interested in the Zacks Airline industry may consider the following better-ranked stocks.
American Airlines (AAL - Free Report) , which currently carries a Zacks Rank #2 (Buy), is being aided by the improved air-travel-demand situation. The carrier's debt-reduction efforts are impressive as well. Management aims to reduce its debt by $15 billion by 2025 end. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For the second quarter and 2023, AAL’s earnings are expected to register 65.8% and 440% growth, respectively, on a year-over-year basis.
Alaska Air Group (ALK - Free Report) , currently carrying a Zacks Rank #2, benefits from the improved air-travel-demand scenario. On the back of upbeat air-travel demand and favorable pricing, Alaska Air's top line increased 31% year over year in the March-end quarter. ALK expects to boost its fleet and workforce in 2023 to meet the anticipated high demand.
For the second quarter and 2023, ALK’s earnings are expected to register 12% and 44.8% improvements, respectively, on a year-over-year basis.