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Azul's (AZUL) Q1 Loss Wider Than Expected, Revenues Beat
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Azul (AZUL - Free Report) incurred a loss of $1.63 per share on an adjusted basis in the first quarter of 2020, wider than the Zacks Consensus Estimate of a loss of 50 cents. In the year-ago quarter, the company reported adjusted earnings of 49 cents per share. The first-quarter results were affected by coronavirus-induced drop in demand and depreciation of the Brazilian real. Fuel cost hedging losses also weighed on performance.
However, total revenues of $633 million surpassed the Zacks Consensus Estimate of $613 million. Passenger revenues, accounting for bulk (94.7%) of the top line, increased 9% year over year despite low demand due to coronavirus. The upside can be attributed to strong passenger demand in January and February. Also, cargo revenues surged 41% in the reported quarter, mainly on e-commerce growth.
Operational Statistics
Consolidated revenue passenger kilometers (RPK), measuring revenues generated per kilometer per passenger, increased 10.8% year over year. The metric rose 10.3% and 12.3% on the domestic and international front, respectively.
Consolidated available seat kilometers (ASK), measuring an airline's passenger carrying capacity, increased 12% year over year. While domestic capacity expanded 11.5%, international capacity was up 13.6%.
However, with capacity expansion outpacing traffic growth, consolidated load factor (percentage of seats filled with passengers) deteriorated 90 basis points to 81% on year-over-year basis.
While total revenues per ASK (RASK) dropped 1.5%, passenger revenues per ASK (PRASK) fell 2.7%. Meanwhile, cost per ASK (CASK) climbed 7% on an 18% average depreciation in the Brazilian real. Moreover, fuel price per liter increased 5.1% in the March quarter. Additionally, CASM excluding fuel rose 11%. Average fare for the company increased 5.5% from the year-ago quarter’s figure.
Azul exited the first quarter with an operating fleet size of 140 jets. The average age of the fleet is 5.7 years. Contractual fleet size was 167.
Liquidity
Azul, carrying a Zacks Rank #4 (Sell), exited the first quarter with total liquidity (cash, cash equivalents, short-term and long-term investments plus receivables) of R$3.11 billion, down 21.9% year over year. Additionally, total debt (adjusted for currency hedges) surged 33.3% from the December 2019 figure to R$20 billion, primarily due to depreciation of Brazilian real.
For the second quarter, Azul expects to reduce capacity by 75-85% year over year. Due to these capacity reductions and cost-cutting measures, total operating expenses are anticipated to decline approximately 55% year over year. In May and June, the company expects a net cash burn rate of R$3-R$4 million per day.
Performance of Other Airline Stocks
Gol Linhas Aereas Inteligentes , carrying a Zacks Rank #3 (Hold), reported earnings of 20 cents per share (excluding $3.08 from non-recurring items) in first-quarter 2020. The bottom line increased year over year on cost-saving initiatives. Net operating revenues of $710.9 million missed the Zacks Consensus Estimate of $929.8 million and also declined year over year.
Southwest Airlines (LUV - Free Report) , carrying a Zacks Rank #3, incurred loss of 15 cents per share (excluding 3 cents from non-recurring items) in the first quarter of 2020, narrower than the Zacks Consensus Estimate of 48 cents. In the year-ago quarter, the company reported earnings of 70 cents per share. The results reflect the coronavirus-induced drop in passenger demand. Meanwhile, operating revenues of $4,234 million lagged the Zacks Consensus Estimate of $4,397 million and also declined 17.8% year over year.
American Airlines (AAL - Free Report) , carrying a Zacks Rank #3, incurred a loss (excluding $2.61 from non-recurring items) of $2.65 per share in first-quarter 2020, comparing unfavorably with the Zacks Consensus Estimate of a loss of $2.16. The company reported earnings per share of 52 cents in the year-ago quarter. Results in first-quarter 2020 were hurt by the coronavirus-led drop in air-travel demand. Operating revenues of $8,515 million declined 19.6% year over year and also fell short of the Zacks Consensus Estimate of $9,146.7 million.
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Azul's (AZUL) Q1 Loss Wider Than Expected, Revenues Beat
Azul (AZUL - Free Report) incurred a loss of $1.63 per share on an adjusted basis in the first quarter of 2020, wider than the Zacks Consensus Estimate of a loss of 50 cents. In the year-ago quarter, the company reported adjusted earnings of 49 cents per share. The first-quarter results were affected by coronavirus-induced drop in demand and depreciation of the Brazilian real. Fuel cost hedging losses also weighed on performance.
However, total revenues of $633 million surpassed the Zacks Consensus Estimate of $613 million. Passenger revenues, accounting for bulk (94.7%) of the top line, increased 9% year over year despite low demand due to coronavirus. The upside can be attributed to strong passenger demand in January and February. Also, cargo revenues surged 41% in the reported quarter, mainly on e-commerce growth.
Operational Statistics
Consolidated revenue passenger kilometers (RPK), measuring revenues generated per kilometer per passenger, increased 10.8% year over year. The metric rose 10.3% and 12.3% on the domestic and international front, respectively.
Consolidated available seat kilometers (ASK), measuring an airline's passenger carrying capacity, increased 12% year over year. While domestic capacity expanded 11.5%, international capacity was up 13.6%.
However, with capacity expansion outpacing traffic growth, consolidated load factor (percentage of seats filled with passengers) deteriorated 90 basis points to 81% on year-over-year basis.
AZUL SA Price, Consensus and EPS Surprise
AZUL SA price-consensus-eps-surprise-chart | AZUL SA Quote
While total revenues per ASK (RASK) dropped 1.5%, passenger revenues per ASK (PRASK) fell 2.7%. Meanwhile, cost per ASK (CASK) climbed 7% on an 18% average depreciation in the Brazilian real. Moreover, fuel price per liter increased 5.1% in the March quarter. Additionally, CASM excluding fuel rose 11%. Average fare for the company increased 5.5% from the year-ago quarter’s figure.
Azul exited the first quarter with an operating fleet size of 140 jets. The average age of the fleet is 5.7 years. Contractual fleet size was 167.
Liquidity
Azul, carrying a Zacks Rank #4 (Sell), exited the first quarter with total liquidity (cash, cash equivalents, short-term and long-term investments plus receivables) of R$3.11 billion, down 21.9% year over year. Additionally, total debt (adjusted for currency hedges) surged 33.3% from the December 2019 figure to R$20 billion, primarily due to depreciation of Brazilian real.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Q2 Outlook
For the second quarter, Azul expects to reduce capacity by 75-85% year over year. Due to these capacity reductions and cost-cutting measures, total operating expenses are anticipated to decline approximately 55% year over year. In May and June, the company expects a net cash burn rate of R$3-R$4 million per day.
Performance of Other Airline Stocks
Gol Linhas Aereas Inteligentes , carrying a Zacks Rank #3 (Hold), reported earnings of 20 cents per share (excluding $3.08 from non-recurring items) in first-quarter 2020. The bottom line increased year over year on cost-saving initiatives. Net operating revenues of $710.9 million missed the Zacks Consensus Estimate of $929.8 million and also declined year over year.
Southwest Airlines (LUV - Free Report) , carrying a Zacks Rank #3, incurred loss of 15 cents per share (excluding 3 cents from non-recurring items) in the first quarter of 2020, narrower than the Zacks Consensus Estimate of 48 cents. In the year-ago quarter, the company reported earnings of 70 cents per share. The results reflect the coronavirus-induced drop in passenger demand. Meanwhile, operating revenues of $4,234 million lagged the Zacks Consensus Estimate of $4,397 million and also declined 17.8% year over year.
American Airlines (AAL - Free Report) , carrying a Zacks Rank #3, incurred a loss (excluding $2.61 from non-recurring items) of $2.65 per share in first-quarter 2020, comparing unfavorably with the Zacks Consensus Estimate of a loss of $2.16. The company reported earnings per share of 52 cents in the year-ago quarter. Results in first-quarter 2020 were hurt by the coronavirus-led drop in air-travel demand. Operating revenues of $8,515 million declined 19.6% year over year and also fell short of the Zacks Consensus Estimate of $9,146.7 million.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>