Yahoo Finance AZUL Benefits From Surge in Travel Demand Amid Debt Woes
Azul S.A. (AZUL) has been seeing a steady rebound in air travel demand, both on the domestic as well as international front. With solid air-travel demand across the globe, AZUL's top line has been improving. As a reflection of this, first-quarter 2024 revenues of $945 million increased year over year owing to a healthy demand environment (both domestic and international), robust ancillary revenues, and growth in the company’s other business units. With more people taking to the skies, Azul’s passenger revenues (contributing 93.1% to the top line) increased 4.5% year over year (on 2.6% higher total capacity).
Strong growth in e-commerce is boosting revenues at Azul’s cargo business unit. Notably, in the first quarter of 2024, cargo and other revenues rose 4.2% year over year, owing to the solid performance of the company’s cargo and vacation businesses.
Azul's fleet-modernization efforts are commendable. Azul operates the most fuel-efficient and environmentally friendly fleet in Brazil. Next-generation aircraft dominate Azul's fleet. In the first quarter of 2024, fuel consumption per available seat kilometers (ASK) was down 2.6% from the year-ago level due to a higher number of next-generation aircraft in AZUL's fleet. Azul exited the first quarter of 2024 with a total passenger operating fleet of 181 aircraft. The average age of the fleet was 7.4 years. The contractual fleet size was 183.
Azul's operating income is being aided by higher revenues. As evidence, operating income in first-quarter 2024 increased an impressive 73.2% year over year to R$800.7 million. Operating margin rose to 17.1% from 10.3% in the year-ago reported quarter.
Despite such tailwinds, AZUL's liquidity position is a concern. Cash and cash equivalents of $274 million at the end of first-quarter 2024 were much lower than the $2.73 billion of long-term debt. This implies that the company does not have enough cash to meet its debt burden.
Zacks Rank and Stocks to Consider
AZUL currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include GATX Corporation GATX and Trinity Industries, Inc. (TRN). Each stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GATX has an encouraging earnings surprise history. The company has surpassed the Zacks Consensus Estimate in three of the last four quarters (missing the mark in the other). The average beat is 7.49%.
The Zacks Consensus Estimate for 2024 earnings has been revised 3% upward over the past 90 days. GATX has an expected earnings growth rate of 6.79% for 2024. Shares of the company have risen 18.4% in the past year.
Trinity raised 2024 earnings per share guidance to the range of $1.35 to $1.55 (which excludes items outside of the company’s core business operations) from $1.30 to $1.50 guided previously.
Over the past 30 days, the Zacks Consensus Estimate for TRN’s 2024 earnings has been revised 2.7% upward. For 2024, TRN’s earnings are expected to grow 8.70% year over year.
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