Gol Linhas (GOL) Q4 Earnings Lag Estimates, Improve Y/Y

Gol Linhas Aereas Inteligentes’ (NYSE:GOL) earnings (excluding 1 cent from non-recurring items) of 43 cents per share in fourth-quarter 2019 fell short of the Zacks Consensus Estimate by a couple of cents. The bottom line, however, increased 13.2% on a year-over-year basis, mainly on high passenger revenues.

Additionally, net revenues of $924.3 million rose 9.9% year over year. Passenger revenues accounting for bulk (94.2%) of the top line also improved 20.1% on a year-over-year basis as demand for air travel remained strong. Cargo revenues inched up 4.9%. The airline carried 9.7 million customers in the reported quarter.

Operational Statistics

Consolidated revenue passenger kilometers (RPK) — measure for revenues generated per kilometer per passenger — were up 5.5% year over year. The metric climbed 6.6% domestically but dipped 2.6% on the international front.

Consolidated available seat kilometers (ASK), measuring an airline's passenger carrying capacity, rose 6% year over year. While domestic capacity expanded 7%, international capacity slid 0.9%.

Furthermore, the company’s total load factor (percentage of seats filled with passengers) was 81.5% compared with 81.9% in the year-ago period. The metric deteriorated as traffic growth was outpaced by capacity expansion. Average yield per passenger ascended 13.8%

While net passenger revenue per ASK augmented 12.1%, net revenue per ASK grew 13.3%. Average fuel price per liter decreased 15.6%. Moreover, cost per ASK fell 12.8% year over year, primarily owing to improved efficiency and higher capacity. Besides, the metric was down 11.1% excluding fuel. Total operating expenses escalated 29.9% year over year to R$3.1 billion.

Gol Linhas, carrying a Zacks Rank #2 (Buy), exited the year with total liquidity (including cash and cash equivalents, financial investments, restricted cash and accounts receivable) of (Brazilian real: R) $4.3 billion compared with R$1.3 billion at 2018-end.

This Latin American carrier generated operating cash flow of R$1 billion in the reported quarter. The company repaid debt worth R$617.1 million in the period. Additionally, long-term debt totaled R$10.5 billion at the end of the reported quarter, almost flat year over year. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Q1 Outlook

The company anticipates first-quarter 2020 cost per ASK excluding fuel to rise approximately 4-6% year over year. Meanwhile, courtesy of strong passenger demand and solid revenues, Gol Linhas estimates net revenue per ASK to climb 4-6% in the March quarter.

2020 & 2021 Views

For 2020, net revenues are now estimated at R$15.4 billion (old guidance: R$15.5 billion). Earnings are now expected between $1.25 and $1.5 per share. Previously, the estimate was in the range of $1.4-$1.65. The prediction for pre-tax margin is unchanged at 13%.

The company’s expected fleet size at the end of the year is anticipated to be 135-139 (earlier expectation: 134-139). The projection for capacity growth still stands at 7-9%. The EBITDA margin estimate is retained at 30%. The forecast for EBIT margin is reaffirmed at 19%.

For 2021, net revenues are envisioned at R$17 billion. Earnings are expected between $1.9 and $2.3 per share. The prediction for pre-tax margin is at 13%. The company’s expected fleet size at the year-end is anticipated to be 137-141. Capacity growth is estimated at 7-9%. The EBITDA margin is assumed at 31%. The forecast for EBIT margin is 20%.

Upcoming Releases

Investors interested in the broader Transportation sector are awaiting fourth-quarter earnings reports from key players like Azul (NYSE:AZUL) , Frontline (NYSE:FRO) and Golar LNG Ltd. (NASDAQ:GLNG) . While Azul and Frontline will announce fourth-quarter results on Mar 12 and Feb 27, respectively, Golar LNG will release the same on Feb 25.

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