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LATAM Airlines' (LTM) Q4 Earnings Beat, Revenues Miss Mark

Zacks Equity Research

LATAM Airlines Group’ LTM fourth-quarter 2019 earnings of 37 cents per share surpassed the Zacks Consensus Estimate of 24 cents. In fourth-quarter 2018, the company reported earnings of 25 cents. The year-over-year improvement was partly due to the 10.6% decrease in average fuel price per gallon.

Total revenues increased year over year but missed the Zacks Consensus Estimate by 2.1%. The year-over-year improvement was owing to a 6.5% rise in passenger revenues, which accounted for 86.3% of the top line. During the quarter, LATAM Airlines carried 19.95 million passengers, up 9.4% year over year. The uptick was mainly due to strong performances at the carrier’s domestic markets. Cargo revenues, however, declined 10.3% in the quarter partly due to the sale of MasAir in the second half of 2018.

Operating expenses increased 3.1% year over year. However, fuel costs decreased 10.6% despite a 3.2% rise in fuel consumption. Excluding fuel costs, cost per available seat mile (CASK) increased 6.7% due to higher maintenance and depreciation expenses, capacity adjustments in international routes and a shorter average stage length. Load factor (% of seats filled by passengers) decreased 20 basis points to 82.9% as consolidated traffic growth (3%) was outpaced by capacity expansion (3.2%). Revenue per ASK improved 3.1%.

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

Meanwhile, expenses on wages and benefits decreased 5.7% owing to depreciation of local currencies. The carrier exited the fourth quarter with cash and cash equivalents of $1.07 billion compared with $1.08 billion at the end of 2018. LATAM Airlines had a total financial debt of $7.19 billion at the end of the fourth quarter compared with $7.26 billion at 2018 end.

LATAM Airlines expects to end 2020 with an operating fleet of 341. The same is expected to increase to 344 and 354 at the end of 2021 and 2022, respectively. For 2020, operating margin is anticipated in the range of 7-8.5%. Additionally, capacity is expected to increase 3-5% in the current year.

Zacks Rank & Other Key Picks

LATAM Airlines carries a Zacks Rank #1 (Strong Buy). Some other top-ranked stocks in the same space are Azul AZUL, Ryanair Holdings RYAAY and Spirit Airlines, Inc. SAVE. While Azul and Ryanair sport a Zacks Rank #1, Spirit carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Azul has an impressive earnings history. It outperformed the Zacks Consensus Estimate in three of the preceding four quarters and missed estimates in remaining one quarter, the beat being 199%, on average. Ryanair surpassed estimates in three of the past four quarters and missed estimates in remaining one quarter, the beat being 56.3%, on average. Spirit trumped the Zacks Consensus Estimate in three of the trailing four quarters and matched estimates in remaining one quarter, the beat being 2.8%, on average.

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Click to get this free report Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report LATAM Airlines Group S.A. (LTM) : Free Stock Analysis Report AZUL SA (AZUL) : Free Stock Analysis Report To read this article on click here. Zacks Investment Research