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Here's Why Investors Should Give Volaris Stock a Miss Now
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Key Takeaways
VLRS Q1 revenues fell 11.7% to $678M due to peso depreciation and lower revenue per passenger.
TRASM dropped 17% year over year, while the base fare plunged nearly 29% to just $39.
Total expenses rose to $688M, and a current ratio of 0.74 flags serious short-term liquidity concerns.
Controladora Vuela Compania de Aviacion, B. de C.V.’s (VLRS - Free Report) —also known asVolaris— top line is grappling with the adverse currency translation effect. Weak liquidity and escalated operating expenses also put a strain on the company’s prospects, making it an unattractive choice for investors’ portfolios.
Let’s delve deeper.
VLRS: Key Risks to Watch
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-year earnings has declined significantly in the past 60 days. For the next year, the consensus mark for earnings has been revised more than 100% downward in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Image Source: Zacks Investment Research
Dim Price Performance: The company’s price trend reveals that its shares have dropped 33.5% over the past year compared to the Transportation - Airline industry’s 18.8% rise.
Image Source: Zacks Investment Research
Weak Zacks Rank: Volaris currently carries a Zacks Rank #4 (Sell).
Headwinds: The adverse currency translation effect, triggered by the depreciation of the Mexican peso against the U.S. dollar in the first quarter of 2025, played a key role in reducing total operating revenues for the quarter to $678 million, marking an 11.7% year-over-year decline. This revenue drop was further compounded by a decrease in total operating revenue per passenger. TRASM (Total Revenue per Available Seat Mile) dropped 17% year over year to 7.76 cents, indicating reduced revenue efficiency.
Total operating revenue per passenger also declined 17.6% to $91, largely due to a steep 28.8% fall in the average base fare, which stood at $39. These results underscore mounting financial pressures due to unfavorable foreign exchange rates and weakened pricing strategies.
Moreover, the company’s financial stability is challenged by elevated expenses and weak liquidity. In the first quarter of 2025, total operating expenses rose to $688 million compared with $664 million in the March-end quarter of 2024. Moreover, VLRS exited the quarter with a current ratio (a measure of liquidity) of 0.74. A current ratio of less than 1 is undesirable as it indicates that the company does not hold sufficient cash to meet its short-term obligations.Bottom of Form
CPA has an expected earnings growth rate of 14.3% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 5.5%. Shares of CPA have risen 17.9% year to date.
RYAAY currently carries a Zacks Rank of #2.
RYAAY has an expected earnings growth rate of 30.5% for the current year. The company has a mixed earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, delivering an average beat of 46.6%. Shares of RYAAY have rallied 26.2% year to date.
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Here's Why Investors Should Give Volaris Stock a Miss Now
Key Takeaways
Controladora Vuela Compania de Aviacion, B. de C.V.’s (VLRS - Free Report) —also known asVolaris— top line is grappling with the adverse currency translation effect. Weak liquidity and escalated operating expenses also put a strain on the company’s prospects, making it an unattractive choice for investors’ portfolios.
Let’s delve deeper.
VLRS: Key Risks to Watch
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-year earnings has declined significantly in the past 60 days. For the next year, the consensus mark for earnings has been revised more than 100% downward in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Image Source: Zacks Investment Research
Dim Price Performance: The company’s price trend reveals that its shares have dropped 33.5% over the past year compared to the Transportation - Airline industry’s 18.8% rise.
Image Source: Zacks Investment Research
Weak Zacks Rank: Volaris currently carries a Zacks Rank #4 (Sell).
Headwinds: The adverse currency translation effect, triggered by the depreciation of the Mexican peso against the U.S. dollar in the first quarter of 2025, played a key role in reducing total operating revenues for the quarter to $678 million, marking an 11.7% year-over-year decline. This revenue drop was further compounded by a decrease in total operating revenue per passenger. TRASM (Total Revenue per Available Seat Mile) dropped 17% year over year to 7.76 cents, indicating reduced revenue efficiency.
Total operating revenue per passenger also declined 17.6% to $91, largely due to a steep 28.8% fall in the average base fare, which stood at $39. These results underscore mounting financial pressures due to unfavorable foreign exchange rates and weakened pricing strategies.
Moreover, the company’s financial stability is challenged by elevated expenses and weak liquidity. In the first quarter of 2025, total operating expenses rose to $688 million compared with $664 million in the March-end quarter of 2024. Moreover, VLRS exited the quarter with a current ratio (a measure of liquidity) of 0.74. A current ratio of less than 1 is undesirable as it indicates that the company does not hold sufficient cash to meet its short-term obligations.Bottom of Form
Stocks to Consider
Investors interested in the Transportation sector may consider Copa Holdings (CPA - Free Report) and Ryanair (RYAAY - Free Report) .
CPA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CPA has an expected earnings growth rate of 14.3% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 5.5%. Shares of CPA have risen 17.9% year to date.
RYAAY currently carries a Zacks Rank of #2.
RYAAY has an expected earnings growth rate of 30.5% for the current year. The company has a mixed earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, delivering an average beat of 46.6%. Shares of RYAAY have rallied 26.2% year to date.