On Thursday, TD Cowen showed confidence in Volaris (NYSE: VLRS) shares, raising the airline's price target to $14 from $13, while reiterating a Buy rating on the stock. This adjustment comes after Volaris reported third-quarter earnings per share (EPS) of $0.32, which exceeded both TD Cowen's and consensus estimates of $0.30 and $0.18, respectively.
In the third quarter of 2024, Volaris managed to outperform expectations, a feat attributed to the company's effective handling of groundings related to GTF engines and its revenue growth, particularly in the transborder market.
The airline's management has also projected a robust fourth quarter, with an EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) margin of around 39%.
The analyst noted Volaris's strong operational performance and its ability to maintain a healthy business trajectory into 2025. This positive outlook is further supported by the airline's solid balance sheet, which boasts a net leverage ratio of 2.7 times.
The raised stock price target reflects the analyst's optimism about the airline's future financial performance and market position. Volaris's recent achievements and forward guidance indicate a company that is on a stable path, with a financial strategy that supports sustained growth.
In other recent news, Volaris, the Mexico-based airline, reported a steady Q3 2024 earnings with a net income for the fourth consecutive quarter. Despite a 25% reduction in fleet operations, the company's total operating revenue matched the full-year 2023 figures at $3.2 billion.
Ancillary revenues increased to 51% of total operating revenues, and the net debt-to-EBITDA ratio improved to 2.7 times from 3.5 times. The company has launched new routes focusing on the US-Mexico transborder market, with plans to return to 2023 capacity levels by mid-2025.
Volaris expects total revenue for 2024 to be close to 2023 levels despite a projected double-digit capacity reduction. These developments highlight Volaris' resilience and strategic positioning for future growth.
InvestingPro Insights
Recent data from InvestingPro aligns with TD Cowen's bullish stance on Volaris (NYSE: VLRS). The company's P/E ratio of 6.93 suggests it's trading at a low earnings multiple, which could indicate potential undervaluation. This is particularly noteworthy given that Volaris has been profitable over the last twelve months and analysts predict continued profitability this year.
InvestingPro Tips highlight that Volaris has shown strong returns over the last month and three months, with price total returns of 12.4% and 16.86% respectively. This recent momentum supports the positive sentiment expressed in the analyst's report. Additionally, the company's net income is expected to grow this year, which aligns with the analyst's projection of a robust fourth quarter and healthy business trajectory into 2025.
It is worth noting that InvestingPro offers 8 additional tips for Volaris, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights can be particularly valuable given the airline industry's dynamic nature and Volaris's recent outperformance.
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