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Bull of the Day: Gol Linhas Aereas Inteligentes (GOL)

Zacks

Gol Linhas Aereas Inteligentes (GOL) is Brazil's largest airline, carrying 33 million passengers annually on more than 700 daily flights to 63 destinations, 52 in Brazil and 11 in South America and the Caribbean, on a fleet of 120 Boeing 737 aircraft, with a further 120 Boeing 737 MAX on order.

Earnings Results

The company recently reported earnings where they crushed the Zacks consensus earnings estimate (actual $0.60 vs. expected $0.19), and easily beat the consensus revenue estimate (actual $859 million vs. expected $783 million). The company saw year over year gains in the following major areas; net revenues +13.2%, recurring operating income +49.3%, auxiliary and cargo revenues +7.0%, net income +12.1%, and adjusted total net debt -66.7%.

Management’s Take

In discussing the recent earnings report, Paulo Kakinoff, CEO, commented, “Brazilian macroeconomic remains a challenging environment, once again we renew our commitment to continuous improving customer experience, strong discipline in seats supply, growth in load factor, and cost control to generate better operating results. As a result, we achieved good operating results, with recurring EBITDA margin increasing by 3.7 p.p. in relation to 3Q16.”

Factors of the Earnings Guidance Increase

Due to improved demand both domestically and internationally, an expanding Brazilian economy, an upturn in the number of total seats, and international development, management increased FY 17 EPS guidance from a range of $0.57-0.78 to $1.25-1.40.
In the month of October the company saw total volume of departures increase by +0.5% with the total number of available seats rising by +0.3%. Further, GOL’s load factor was 80.6% during the month, which was an improvement of +4.4% when compared to the year ago quarter. On the domestic side, the company posted an uptick in total departures, +0.5%, and total number of seats +0.4%. Most importantly, GOL saw demand rise by +9.1%, and its load factor up +5.5%. As for the international segment, demand was up +0.3%, and total seat supply increased by +3.9%.

Price and Earnings Consensus Graph

As you can see in the graph below, 2015 and the first half of 2016 was a difficult time period for the company, but the impressive Q3 earnings and increased guidance caused the stock price and future earnings estimates to rise.

Gol Linhas Aereas Inteligentes S.A. Price and Consensus

Gol Linhas Aereas Inteligentes S.A. Price and Consensus | Gol Linhas Aereas Inteligentes S.A. Quote

Increasing Earnings Estimates

Over the past 30 days, earnings estimates have greatly improved with Q4 17, FY 17, and FY 18 all seeing positive revisions; Q4 17 almost doubled from $0.15 to $0.28, FY 17 more than doubled from $0.15 to $0.33, and FY 18 rose from $0.33 to $0.43.

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