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LATAM Airlines (LTM) Q1 Loss Wider Than Expected Amid Coronavirus

Zacks Equity Research

LATAM Airlines Group LTM incurred a loss (excluding $2.85 from non-recurring items) of 65 cents per share in the first quarter of 2020, wider than the Zacks Consensus Estimate of a loss of 15 cents. The loss amount, which widened year over year, reflects the impact of coronavirus in the form of a goodwill-impairment loss of $1.73 billion.

Total revenues from passenger and cargo operations declined 6.8% year over year to $2,266 million and fell short of the Zacks Consensus Estimate of $2,347 million. The deterioration was due to a 7.1% fall in passenger revenues, which accounted for 85.6% of the top line. Passenger revenues declined due to reduced capacity (primarily in March) as a result of coronavirus-induced travel demand slump.

During the quarter, LATAM Airlines carried 17.65 million passengers, down 2.9% year over year. Passenger numbers declined in both domestic and international markets. Cargo revenues decreased 4.2% in the quarter with cargo unit revenues slipping 3.2% and cargo capacity falling 1.1%.

LATAM Airlines Group S.A. Price, Consensus and EPS Surprise

 

LATAM Airlines Group S.A. Price, Consensus and EPS Surprise

LATAM Airlines Group S.A. price-consensus-eps-surprise-chart | LATAM Airlines Group S.A. Quote


Total operating expenses decreased 7.6% year over year with fuel costs declining 12.6% due to 11.1% reduction in fuel consumption. Lower capacity and devaluation of currencies also lowered operating costs. Excluding fuel costs, cost per available seat kilometer (CASK) inched up 1.2% due to drop in March capacity. Load factor (% of seats filled by passengers) decreased 310 basis points to 81% as consolidated traffic declined (10.1%) more than capacity contraction (6.6%). Consolidated passenger unit revenue (RASK) dipped 0.6% year over year.

Meanwhile, expenses on wages and benefits decreased 14.7% owing to depreciation of local currencies. The carrier exited the first quarter with cash and cash equivalents of $1.51 billion compared with $1.12 billion at the end of the year-ago period. LATAM Airlines, carrying a Zacks Rank #4 (Sell), had total financial debt of $7.58 billion at the end of the first quarter compared with $7.19 billion at the end of the year-ago period.

Performance of Other Airlines Stocks

Gol Linhas Aereas Inteligentes’ GOL earnings of 20 cents per share (excluding $3.08 from non-recurring items) in first-quarter 2020 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 declined year over year. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Copa Holdings CPA, carrying a Zacks Rank #3 (Hold), reported earnings of $1.75 per share in the first quarter, beating the Zacks Consensus Estimate by 19 cents. The bottom line fell 17.1% year over year primarily due to lower revenues. Quarterly revenues declined 11.4% to $595.5 million but beat the Zacks Consensus Estimate of $592.8 million.

Azul AZUL, carrying a Zacks Rank #3, incurred a loss of $1.63 per share on an adjusted basis in the first quarter, 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. Total revenues of $633 million surpassed the Zacks Consensus Estimate of $613 million.

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