Hot Airlines stock to watch: LATAM Airlines Group SA (NYSE: LTM)

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LATAM Airlines Group SA (NYSE: LTM) stock rose over 4.4% on March 13th, 2019 (as of 12:29 pm GMT-4; Source: Google finance) after the company in the fourth quarter of FY 18 has reported net income of US$148.7 million, which is an increase of US$81.5 million compared with the same period in 2017. Total revenues in fourth quarter grew 0.8% to US$2,788.3 millionyear-on-year. This increase was driven by a 2.3% increase in passenger revenues as a result of 6.5% capacity growth (ASK) despite a 4.0% decline in passenger revenue per available seat kilometer (RASK).

Moreover, Cargo revenues fell by 7.4% in the quarter, due to decline of 6.6% in cargo yields while cargo capacity increased by 1.1% as compared to the fourth quarter of 2017. Import markets showed a decline year-over-year, driven by the weaker currencies in Brazil and Argentina. This was partially offset by an improvement in export markets, especially salmon from Chile. As a result, cargo revenues per ATK declined by 8.4% in comparison to the same quarter for the previous year. Other revenues totaled US$149.0 million in the fourth quarter 2018, a 4.5% decrease compared to the same period of last year. This year-over-year decline is due to lower revenues derived from Multiplus, driven by the devaluation of the Brazilian real, and lower revenues generated by LATAM Travel.

LTM reported an operating income of US$295.2 million for the fourth quarter of 2018, a 9.3% increase compared to the US$270.0 million operating income in the fourth quarter of 2017. Operating margin rose to 10.6%, which is an increase of 0.8 percentage points compared with the same period last year. This margin expansion was due to a 2.3% increase in passenger revenues and relatively flat operating expenses, despite the 27.9% increase in fuel costs during the quarter.

Additionally, by the end of the quarter, LATAM´s gross financial debt amounted to US$7.3 billion, a US$629.9 million reduction compared to the last year, thus decreasing its leverage to 4.3x from 4.5x in September 2018. For 2019, the Company has roughly US$986 million in debt maturities. At the end of the fourth quarter 2018, LATAM reported US$1,404 million in cash and cash equivalents, including certain highly liquid investments accounted as other current financial assets. Furthermore, the Company´s liquidity position was enhanced by US$600 million of an undrawn revolving credit facility2 (RCF) line, which remained at the same level compared to the previous quarter. Thus, LATAM’s liquidity position amounted to 19.3% of the last twelve months’ net revenue by December 31, 2018.

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