Will Passenger Revenues Boost Gol Linhas' (GOL) Q4 Earnings?

Gol Linhas Aereas Inteligentes S.A. (NYSE:GOL) is set to release fourth-quarter 2019 results on Feb 20, before the market opens.

The Zacks Consensus Estimate for fourth-quarter earnings has been revised upward by 60.7% in the past 60 days. However, the company does not have a healthy record with respect to positive surprises given that its earnings surpassed estimates in only two of the last four quarters (in-line result in one and a miss in the other).

Let’s see what awaits Gol Linhas in the fourth quarter.

Factors Likely at Play

Strong air travel demand is anticipated to have boosted passenger revenues, which accounts for more than 90% of the top line. The company’s fourth-quarter performance is also expected to have benefited from its focus on capacity discipline and improving yields. Evidently, the airline anticipates passenger revenue per available seat kilometers to have augmented approximately 11% in the quarter under review. Additionally, revenue per available seat kilometers is envisioned to have ascended 11% year over year in the period.

Moreover, with ramped-up productivity and low fuel expenses, reduced unit costs are likely to get reflected in the bottom line. The carrier estimates cost per available seat kilometers excluding fuel (unit costs or CASK ex-fuel) to have declined 10% year over year in the fourth quarter. Further with 13% decrease in average fuel price and a 2% dip in fuel consumption per flight hour, CASK fuel (fuel unit costs) is likely to have plunged approximately 21%.

However, as has been the case over the last three quarters, depreciation of the Brazilian real against the US dollar might have affected the company’s fourth quarter performance.

Earnings Whispers

Our proven model does not conclusively predict a beat for Gol Linhas this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Gol Linhas has an earnings ESP of 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate are pegged at 45 cents.

Zacks Rank: Gol Linhas carries a Zacks Rank #2.

Highlights of Q3 Earnings

In the last reported quarter, the company delivered a positive earnings surprise of 6.3%. Although, net revenues increased significantly year over year owing to capacity discipline and solid demand in the corporate segment, it missed the Zacks Consensus Estimate. Passenger revenues accounting for bulk (94.4%) of the top line improved 29.5% on a year-over-year basis. However, results were partly affected by 4% depreciation of the Brazilian real against the US dollar.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Azul S.A. (NYSE:AZUL) , Frontline Ltd. (NYSE:FRO) and LATAM Airlines Group S.A. (NYSE:LTM) as these stocks possess the perfect mix of elements to beat on earnings in their next releases.

Azul has an Earnings ESP of +16.13% and a Zacks Rank of 1. The company will release fourth-quarter earnings numbers on Mar 12. You can see the complete list of today’s Zacks #1 Rank stocks here.

Frontline is a #1 Ranked company and has an Earnings ESP of +41.18%. This company will announce fourth-quarter earnings numbers on Feb 28.

LATAM has an Earnings ESP of +6.38% and a Zacks Rank of 2. The company will release fourth-quarter earnings numbers on Mar 4.

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