Here's Why Investors Should Retain Azul (AZUL) Stock Now

Azul S.A. AZUL is benefiting from a steady recovery in air travel demand, especially on the international front.

Factors Favoring AZUL

Azul is seeing a steady rebound in air travel demand, particularly in its domestic markets. Mainly owing to this improvement in international traffic, consolidated traffic, measured in revenue passenger kilometers (RPKs), rose 12% (up 4.2% in domestic and 45.8% on the international front) year over year in third-quarter 2023. Consolidated available seat kilometers (ASK), measuring an airline's passenger-carrying capacity, increased 11.5% from the year-ago quarter’s levels, with a 4.2% rise in domestic capacity and a 46.2% increase in international capacity. With more people taking to the skies, Azul’s passenger revenues, contributing 93.1% to the top line, up 12.4% year over year (on higher total capacity).

Declining operating expenses should boost AZUL's bottom line. Total operating expenses fell marginally from its year-ago levels in third-quarter 2023. The downside was caused by a 28.1% reduction in fuel prices, cost-reduction initiatives and productivity gains. Cost per available seat kilometer (CASK) also fell 10.7% year over year in the third quarter.

Key Risks

AZUL's liquidity position is a concern. Cash and cash equivalent of $136 million at the end of 2022 was lower than the $1,454 million of long-term debt. This implies that the company does not have enough cash to meet the debt burden.

Zacks Rank

AZUL currently carries Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks for investors interested in the Zacks Transportation sector are Air Canada ACDVF and SkyWest SKYW.

Air Canada currently sports a Zacks Rank #1 (Strong Buy). An uptick in passenger traffic is aiding ACDVF. Recently, management announced plans to launch a new year-round route between Montreal and Madrid.  You can see the complete list of today’s Zacks #1 Rank stocks here.

The service will commence in May of the following year as part of its expanded international summer 2024 flying schedule to cater to increased demand.  

SkyWest currently carries a Zacks Rank #2 (Buy). SKYW's fleet-modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for current-quarter earnings has surged 83.3% in the past 60 days.
 

The New Gold Rush: How Lithium Batteries Will Make Millionaires

As the electric vehicle revolution expands, investors have a chance to target huge gains. Millions of lithium batteries are being made & demand is expected to increase 889%.

Download the brand-new FREE report revealing 5 EV battery stocks set to soar.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SkyWest, Inc. (SKYW) : Free Stock Analysis Report

AZUL (AZUL) : Free Stock Analysis Report

Air Canada (ACDVF) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.