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Gol Linhas' Q4 Unit Revenue View Upbeat on Capacity Discipline

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Gol Linhas Aereas Inteligentes S.A. (GOL - Free Report) has provided a bullish view on its upcoming fourth-quarter 2018 financial results, scheduled to be revealed on Feb 28.

The company expects operating margin (or EBIT margin) in the range of 19.5-20%, reflecting an improvement of 6 percentage points (pp) year over year. The guidance includes operating results from NG aircraft. Also, EBITDA margin is expected to be 25-25.5% in the period. Additionally, operating cash flow is anticipated to be between R$450 million and R$500 million.

Gol Linhas’ consistent focus on capacity discipline and revenue management strategies is yielding results. Consequently, the carrier predicts passenger unit revenues (PRASK) to rise approximately 6-6.5% year over year. Also, unit revenues (RASK) are expected to increase 5.5-6%.

The company estimates average fuel price per liter between R$3.25 and R$3.30 in the final quarter of 2018. While non-fuel unit costs (CASK ex-fuel) are projected to reduce nearly 17% compared with the figure recorded in fourth-quarter 2017, CASK ex-fuel and NG results are anticipated to augment approximately 12% due to 17% year-over-year devaluation of the Brazilian real.

Meanwhile, total capacity (ASK) is forecast to expand around 3% year over year whereas the number of seats is predicted to rise approximately 2%.

With constant efforts, Gol Linhas has been able to lower its financial leverage to approximately 2.3x at the end of December 2018 as measured by the Net Debt/LTM EBITDA ratio. Further, the company envisions total liquidity to be R$2.9 billion at fourth-quarter end, commensurate with the tally in third-quarter 2018.

Zacks Rank & Key Picks

Gol Linhas carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Azul SA (AZUL - Free Report) , Allegiant Travel Company (ALGT - Free Report) and JetBlue Airways Corporation (JBLU - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

All of these stocks boast an encouraging earnings surprise history. While Azul trumped the Zacks Consensus Estimate in each of the trailing four quarters, Allegiant and JetBlue beat estimates thrice.

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