Earnings Preview: TAM S.A. (AMR) (GOL) (TAM)

Zacks

TAM S.A. (TAM) will be reporting its second-quarter 2011 earnings on Tuesday, August 9, 2011.

The current Zacks Consensus Estimate for earnings per share (EPS) is 7 cents, representing an annualized growth of 112.07%.

With respect to earnings surprises over the trailing four quarters, TAM outperformed the Zacks Consensus Estimate in two quarters and was in line with the other two quarters. Average earnings surprise was 11.26%, implying that the company outperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

First Quarter Highlights

TAM S.A. reported its financial results for the first quarter of fiscal year 2011 with a net income of R$128.8 million (US$77.6 million), up from a loss of R$70.9 million (US$39.2 million) in the year-ago quarter and down 14.4% sequentially.

Earnings per share entered positive territory and was R$0.80 per share (48 cents per ADR) compared with a loss of R$0.50 per share reported in the year-ago quarter. Earnings were above the Zacks Consensus Estimate of 38 cents per ADR.

In the first quarter, net revenue was R$3,042.5 million (US$1,832.8 million), up 16.8% year over year, but down 5.6% sequentially. The year-over-year improvement was primarily due to higher passenger revenue in the quarter.

Agreement of Estimate Revisions

In the last 30 days, one analyst increased the company’s earnings per share (EPS) estimates for the second quarter, while no analyst decreased the same. For fiscal 2011, one analyst increased the estimate. For fiscal 2012, one analyst decreased estimates, while none increased the same; anticipating a fall in industry profitability, following an upsurge in oil prices.

Magnitude of Estimate Revisions

Estimates over the last 30 days fell from 2 cents to a current 7 cents per share for the second quarter of 2011. The estimate represents a year-over-year growth of 112.07%.

Estimate for fiscal 2011 inched up from 92 cents to 95 cents over the last 30 days, while that for fiscal 2012 showed a downward trend of a change from $1.34 to $1.33. These estimates represented a year-over-year decline of 60.52% for 2011 while a growth of 40.37% for 2012.

Our Take

TAM S.A is likely to post decent results in the second quarter based on anticipated surge in demand for air transport. Moreover, the company’s continued fleet development, agreements/partnerships to increase flight destinations, seat/ticket offerings as well as the proposed merger looks conducive toward a better financial.

TAM S.A., operating through its subsidiaries TAM Linhas Aéreas and TAM Mercosur, is a renowned air transportation service provider, both in the domestic and international markets. TAM competes directly with its peers, such as AMR Corporation (AMR) and GOL Linhas A (GOL).

AMR CORP (AMR): Free Stock Analysis Report

GOL LINHAS-ADR (GOL): Free Stock Analysis Report

TAM SA-ADR (TAM): Free Stock Analysis Report

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