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Gol Linhas (GOL) Q3 Loss Wider, Revenues Miss Estimates

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Gol Linhas Aereas Inteligentes S.A. (GOL - Free Report) incurred a loss (excluding 27 cents from non-recurring items) of 32 cents, much wider than the Zacks Consensus Estimate of a loss of 10 cents. In the year-ago period, the company reported earnings (after minority interest) of 60 cents.  Results were affected by the depreciation of Brazilian Real against the US Dollar, soft bookings from the lingering effects of the trucking strike this May as well as rising fuel prices.

Meanwhile, net revenues came in at $734.3 million (R$2.89 billion), missing the Zacks Consensus Estimate of $737.2 million. Passenger revenues accounted for bulk of the top line and rose 8.9% on a year-over-year basis. This upside was driven by solid demand for air travel owing to a prospering Latin American economy.

Operational Statistics

Consolidated revenue passenger kilometers (RPK) — measure for revenues generated per kilometer per passenger — increased 2.2% year over year. The metric improved 4.3% on the domestic front while decreasing 13.8%, internationally.

Consolidated available seat kilometers (ASK), measuring an airline's passenger carrying capacity, rose 3.7% year over year. While domestic capacity expanded 5.2%, international capacity declined 7.2%.

In the third quarter, the company’s total load factor (percentage of seats filled with passengers) was 79.1% compared with 80.2% in the year-ago period. The metric contracted as capacity expansion exceeded traffic growth.

Average fares increased 4.2% in the quarter under review. While net passenger revenue per ASK climbed 5%, total revenue per ASK grew 4.5% year over year. Cost per ASK increased 11.5% due to rising fuel costs. The metric dipped 3.4% excluding fuel.

Gol Linhas Aereas Inteligentes S.A. Price, Consensus and EPS Surprise


Gol Linhas Aereas Inteligentes S.A. Price, Consensus and EPS Surprise | Gol Linhas Aereas Inteligentes S.A. Quote


This Zacks Rank #3 (Hold) company exited the third quarter with a total liquidity (including cash and cash equivalents, financial investments, restricted cash and accounts receivable) of R$3 billion, a surge of R$871.6 million compared with the year-ago figure. Additionally, long-term debt totaled R$5,920.5 million at the end of the third quarter compared with R$5,943 million at the end of 2017. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Total operating expenses were up 15.6% to R$2,712.1 million. The metric excluding fuel, inched up 0.2% year over year. Total volume of departures and number of seats increased 0.2% and 4.8% each.

2018 Outlook

The company anticipates net revenues of approximately R$11.5 billion, unchanged from the past expectation. Moreover, loss per share is expected to be R$1.80-R$2. Previously, the estimate was in the range of R$1-R$1.20. The forecast for fuel price remains unaltered at R$2.9 per liter. Also, the prediction for pre-tax margin remains fixed at 4% in the current year.

The capex anticipation also remains the same at R$750 million. Meanwhile, an effective income tax rate is still projected to be 23% in the  year.

The company’s expected fleet size at the end of the year has been revised to 118 compared with 117, guided previously. However, the view for capacity and load factor remains unaffected at 1-2% and 79-80%, respectively. Also, the operating margin is fixed at 11% in 2018.

2019 Guidance

The company’s guidance for 2019 remains untouched except for the fleet size, which is now envisioned to be between 121 and 123 compared with the 122-124 band, expected earlier. 2019 earnings per share are projected in the R$1.50-R$1.90 range while pre-tax margin is pegged at 8% for the whole year. Fuel prices are estimated to be R$2.9. Meanwhile, operating margin is unmoved at 12%.

GOL Linhas continues to expect capital expenditures of R$600 million for 2019. Load factor is still anticipated in the 79-81% band while capacity growth is predicted to be 5-10%. Additionally, effective income tax rate is assumed to be approximately 10% in 2019.

Upcoming Releases

Investors interested in the broader Zacks Transportation sector are keenly awaiting third-quarter earnings reports from key players, namely Expeditors International of Washington, Inc. (EXPD - Free Report) , Air Lease Corporation (AL - Free Report) and Azul S.A. (AZUL - Free Report) . While Expeditors will release third-quarter results on Nov 6, Air Lease and Azul will announce the same on Nov 8.

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