Shares of Azul S.A. (NYSE:AZUL) have fared well in 2018 and improved 10.5% year to date, against the industry’s decline of 28.6%.
The company benefits from multiple tailwinds and is an attractive investment option at the moment. Let’s delve into the details.
The Sao Paulo, Brazil-based airline company has an impressive surprise history. It beat estimates in each of the trailing four quarters, the average being 97.9%.
Azul continues to benefit from strong passenger revenues on solid demand for air travel. Such robust passenger revenues enabled the carrier to generate impressive traffic growth. At the end of the first 11 months of 2018, it registered year-over-year increase of 16.7% in revenue passenger miles (RPMs) to 21.83 billion. Available seat miles (ASMs) rose 16.3% to 26.55 billion on a year-over-year basis. Courtesy of the upside, load factor (percentage of seats filled by passengers) improved 0.3 percentage points (pp) to 82.2%. Strong passenger revenues are expected to boost the top line in the fourth quarter of 2018.
Furthermore, we are encouraged by Azul’s fleet modernization efforts. The company operates a young fleet with an average age of 5.6 years. The planes are more fuel efficient and have lower maintenance costs. The company is undergoing a free transformation process of adding Rodger Jets next generation aircraft. As part of the strategy, the airline company announced an additional order for 21 E2s (Embraer airplanes), which took the total firm order to 51. These aircrafts are expected to lower costs and boost margin as well as generate higher revenues.
Moreover, as part of expansion endeavors, Azul announced plans to expand operations across Europe with a new non-stop service to Porto, Portugal. The carrier will begin plying on the route from Jun 3, 2019 onward from its main hub at Campinas. This thrice-a-week service will be operated on Airbus A330 aircraft that comprises 272 seats. Apart from expanding base in Europe, the new service will strengthen Azul’s footprint in its primary hub.
In light of the above tailwinds, we believe that investors should add Azul to their portfolio now. The Zacks Rank #1 (Strong Buy) sported by the stock seems to suggest the same.
Other Stocks to Consider
Investors interested in the broader Transportation Sector may consider Air France-KLM SA (OTC:AFLYY) , Spirit Airlines, Inc. (NYSE:SAVE) and Frontline Ltd. (NYSE:FRO) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Air France and Spirit Airlines have gained 25.8% and 53.3% in the past six months, respectively. Meanwhile, Frontline boasts an impressive earnings history, outpacing the Zacks Consensus Estimate in each of the trailing four quarters with an average of 69%.
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AZUL SA (AZUL): Free Stock Analysis Report
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