Why Is GOL Linhas (GOL) Stock Up More Than 200% This Year?

Shares of GOL Linhas Aéreas Inteligentes S.A. (NYSE:GOL) have skyrocketed 239.2%, comfortably outperforming the Zacks Airline industry’s rally of 13.7% on a year-to-date basis.

In fact, stocks exhibiting such impressive price movements are generally considered as lucrative investment options. This is because the surge in stock price is generally attributed to some positive development(s) surrounding the company and is certainly not out of the blue or arbitrary. The same is true for GOL Linhas, which has witnessed a slew of positive factors leading to the significant stock price appreciation.

Lets delve deep to unearth the factors.

Catalysts Behind the Surge

Currently, GOL Linhas stands to benefit from a strong demand for air travel. In the third quarter of 2017, the carrier’s top line expanded 13.2% on a year-over-year basis on the back of a 14.1% rise in passenger revenues.

In fact, an improved Latin American economy has prompted the carrier to issue an upbeat view for 2017. Based in Sao Paulo, Brazil, the company expects earnings before interest and taxes (EBIT) margin — a measure of the company's earnings ability — around 9% (previous guidance had projected the metric between 7% and 9%). The guidance for EBITDA margin stands at around 14% (previous guidance had projected the metric between 12% and 14%).

GOL Linhas anticipates capacity (available seat kilometers) to be around 0.5% (previous guidance had projected the metric to either remain flat or decline up to 2% on a year-over-year basis). Another important metric, load factor (percentage of seats filled by passengers) is now projected to be around 79% (previous guidance had forecasted the metric in the 77% to 79% range).

Additionally, the company’s focus on maintaining capacity discipline is impressive. The measure is expected to result in improvement in yields, going forward. The carrier’s efforts to reduce its debt levels are an added positive. Efforts to modernize its fleet also raise optimism in the stock.

Furthermore, GOL Linhas’ partnership with key airline players like Delta Air Lines (NYSE:DAL) bodes well.

A Broker Favorite

GOL Linhas’ earnings estimates reflect a healthy uptrend. The company has witnessed the Zacks Consensus Estimate for current-quarter earnings being revised 86.6% upward, in the last 30 days. Also, the current-year earnings estimates have climbed more than 100% in the same time frame.

Given the wealth of information at the disposal of brokers, it is in the best interests of investors to be guided by broker advice and the direction of their estimate revisions. This is because the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.

Zacks Rank & Style Score

Taking into account the above-mentioned tailwinds, we believe that the current price represents an attractive entry point for investors. GOL Linhas’ Zacks Rank #1 (Strong Buy) also supports our view, indicating that the stock is likely to outperform the broader market over the next one to three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

Furthermore, the company’s Momentum Score of B highlights its short-term attractiveness. The Zacks Momentum Style Score indicates when the timing is right to grab a stock and make the most of its momentum. Back-tested results show that stocks with Style Scores of A or B, when combined with a Zacks Rank #1 or 2 (Buy), handily outperform others.

Other Stocks to Consider

Investors interested in the airline space may also consider International Consolidated Airlines Group (LON:ICAG) SA (OTC:ICAGY) and SkyWest (NASDAQ:SKYW) . While International Consolidated Airlines Group sports a Zacks Rank #1, SkyWest holds a Zacks Rank #2.

While shares of International Consolidated Airlines have surged more than 50% on a year-to-date basis, SkyWest has been up more than 36%.

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