GOL Linhas (GOL) Q2 Loss Wider on High Costs, '18 View Dull

GOL Linhas Aereas Inteligentes S.A.’s GOL incurred a loss (excluding $1.66 from non-recurring items) of 45 cents in second-quarter 2018, wider than the Zacks Consensus Estimate of a loss of 27 cents. The figure also increased year over year. Results were affected by the depreciation of Brazilian Real against the US Dollar among other factors. Meanwhile, net revenues came in at $656 million (R$2.4 billion).

Passenger revenues accounted for bulk of the top line and rose 10.3% on a year-over-year basis. This upside was driven by solid demand for air travel owing to improvement in the Latin American economy.

Operational Statistics

Consolidated revenue passenger kilometers (RPK) — the measure of revenues generated per kilometer per passenger — increased 2.5% year over year. The metric improved 4.2% on the domestic front while decreasing 12.9% on the international front.

Consolidated, available seat kilometers (ASK) — the measure of an airline's passenger carrying capacity — rose 2.2% year over year. While domestic capacity expanded 3.2%, international capacity declined 6.1%.

In the second quarter, the company’s total load factor (percentage of seats filled with passengers) was 78.1% compared with 77.9% in the year-ago period. The metric improved as traffic growth outpaced capacity expansion.

Average fares increased 6% in the quarter under review. While net passenger revenue per ASK climbed 8%, total revenue per ASK grew 6.7% year over year. Cost per ASK increased 5.9% due to rising fuel costs. The metric dipped 1.4% 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

Financials

This Zacks Rank #4 (Sell) company exited the second quarter with total liquidity (cash and cash equivalents, financial investments, restricted cash and accounts receivable) of R$3 billion, a surge of R$1.3 billion compared with the year-ago figure. Additionally, long-term debt totaled R$6,497.48 million at the end of the second 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 8.1% to R$2,311.2 million. The measure, excluding fuel, inched up 0.7% year over year. Total volume of departures and number of seats increased 0.6% and 2.4%, respectively.

Bearish 2018 Outlook

The company anticipates net revenues of approximately R$11.5 billion in the remaining year. Additionally, loss per share is expected to be R$1-R$11.20. Previously, the estimate was in the range of R$0.90-R$1.10. Also, fuel price is now predicted to be approximately R$2.9 compared with R$2.5, expected earlier.

The estimate for capital expenditures has been increased to R$750 million from R$700 million, forecast previously. Meanwhile, effective income tax rate is now projected to be 23% compared with the past expectation of 5%.

The company’s anticipated fleet size at the end of the year remains unchanged at 117. The outlook for capacity and load factor also remains unaltered at 1-2% and 79-80%, respectively. Also, the operating margin is fixed at 11% in 2018.

Downbeat 2019 Guidance

The company’s projection for 2019 earnings per share has been trimmed to R$1.50-R$1.90. Former guidance was in the range of R$1.70-R$2.30. Further, the fuel price estimate has moved up to R$2.9 from the previous view of R$2.6. Operating margin is now estimated to be approximately 12%, lower than 13%, envisioned earlier.

GOL Linhas continues to expect capital expenditures of R$600 million for 2019. Load factor is still anticipated in the 79-81% range, capacity growth is expected in the 5-10% band. Meanwhile, the company still expects total fleet size to be between 122 and 124, next year. Additionally, effective income tax rate is projected to be approximately 10% in 2019.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting second-quarter earnings reports from key players, namely Azul S.A. AZUL, Expeditors International of Washington, Inc. EXPD and Air Lease Corporation AL. While Azul will report second-quarter earnings on Aug 9, Expeditors and Air Lease will release the same on Aug 7 and Aug 9, respectively.

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