Shares of Latin-American carrier GOL Linhas Aereas Inteligentes S.A. (GOL) plunged to a 52-week low of 57 cents per share on Dec 23, eventually closing at 59 cents, following dismal November traffic data unveiled late last week. In fact, the carrier has put up a dismal show in 2015. No wonder, shares of the company have shed over 89% year to date.
What Ails GOL?
GOL Linhas has been primarily plagued by the deepening economic crisis in Brazil, weak commodity prices and an adverse currency movement. Last week, the carrier unveiled lackluster traffic data for the month of November. Traffic declined 11% on a 4.5% capacity contraction. Another important metric, load factor (percentage of seats filled by passengers) fell to 73.2% from 78.5% recorded in Nov 2014.
The carrier’s performance in the third quarter of 2015 was also disappointing. Quarterly loss of $2.13 per share was significantly wider than the Zacks Consensus Estimate of a loss of 28 cents. The carrier also reported lower than expected revenues in the quarter. Results were hurt by the prevalent economic woes as well as foreign currency headwinds, owing to the strengthening of the U.S. dollar against the Brazilian real.
In fact, not GOL alone, other Latin American carriers like Copa Holdings CPA too are experiencing tough times. A report released by the International Air Transport Association (IATA) further indicates the struggle that Latin American carriers are undergoing. In 2015, the carriers from the region are expected to incur losses to the tune of 300 million. The outlook for 2016 is not very encouraging either, although it is a tad better. The Latin American carriers are expected to contribute only $400 million to the overall estimated annual profit of $36.3 billion for the airline industry in 2016.
In view of the above difficulties and the disappointing outlook, it is best to stay away from GOL at the moment. The Zacks Rank #4 (Sell) held by the company seems to suggest the same.
Stocks to Consider
Given the troubles facing Latin American carriers, investors interested in the airline space may instead consider U.S.-based stocks like American Airlines Group AAL and Alaska Air Group ALK. Both the stocks carry a Zacks Rank #2 (Buy).
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