LATAM Airlines Group (LTM) Q3 Earnings: What's In Store?

LATAM Airlines Group S.A. (NYSE:LTM) is scheduled to release third-quarter 2018 results on Nov 20, after market close.

In the second quarter, the company reported wider-than-expected loss as well as lower-than-expected revenues. However, the quarterly loss was narrower than the year-ago quarter’s figure despite currency-related headwinds. Also, the top line improved on a year-over-year basis on the back of strength in cargo and passenger revenues.

The company projects a gloomy picture as far as third-quarter 2018 results are concerned. The Zacks Consensus Estimate for earnings has plunged 42.9% in the past 60 days. This indicates the pessimism surrounding the stock.

Moreover, shares of LATAM Airlines Group have underperformed the industry in the July-September period. The stock has declined 5%, against the industry’s rise of 7.5%.

Given this background, let’s delve deep into the factors that are likely to influence the company's upcoming quarterly results.

Escalating oil prices is expected to hurt the company’s third-quarter results. It is a well-documented fact that the health of airline stocks is inversely related to oil prices. This is because fuel costs are among the most significant expenses for carriers. Naturally, the rise in oil prices results in significant increase in operating expenses of carriers, which dents bottom-line growth.

Moreover, currency devaluation in certain Latin American economies apart from political uncertainty is an added challenge for LATAM Airlines Group in the to-be-reported quarter. Also, unit revenues are expected to stay low in the impending quarter.

However, consistent robust top-line performances on the back of solid growth in passenger revenues are expected to provide a boost to the stock in the to-be-reported quarter.

Additionally, strong cash flow generation might boost LATAM Airlines Group’s quarterly results.

Earning Whispers

Our proven model does not show that LATAM Airlines Group is likely to beat estimates this quarter. This is because a stock needs to have a positive Earnings ESP and a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as elaborated below.

Earnings ESP: LATAM Airlines Group has an Earnings ESP of +13.33%. The Most Accurate Estimate is at 9 cents per share while the Zacks Consensus Estimate is pegged at 8 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: LATAM Airlines Group’s Zacks Rank #4 (Sell) is a spoiler. The bearish rank along with a positive Earnings ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Upcoming Releases

Investors interested in the broader Transportation sector will also look forward to third-quarter earnings reports of Diana Shipping Inc. (NYSE:DSX) and KNOT Offshore Partners LP (NYSE:KNOP) on Nov 26 and Nov 27, respectively.

A Transportation Stock to Consider

Investors may consider Tsakos Energy Navigation Limited (NYSE:TNP) as it possesses the right combination of elements to deliver earnings beat in its upcoming quarterly release.

Tsakos Energy has an Earnings ESP of +0.87% and a Zacks Rank #3. The company is expected to report third-quarter earnings on Nov 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

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