The earnings decline came from multiple causes, including a 13% weakening of the Brazilian real versus the US dollar, losses stemming from the grounding of its three Dreamliners, and a weak European market. The Brazilian cargo market also showed weakness and LATAM Airlines Group SA (ADR) (NYSE:LFL) faces competition from international carriers.
While the merger should do well in time, the stock is getting whacked of late, down from $29 per share a little more than a year ago to around $19 today. The planned issuance of another $1 billion in common stock didn’t help the stock price either. This company should grow with the South American economy, but will require patience.
Operating airports where the tourists go
Mexican airport operator Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) operates airports in such popular tourist attractions as Cancun and Cozumel. All told, Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) operates nine airports in southeastern Mexico, a strategic location to Central America located in the heart of coffee-growing country. The active exploration for gold in nearby Vera Cruz doesn’t hurt, either.
The company’s airports handle both passenger and cargo air traffic as well as airport concessions. More recently, Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) won approval from the US FAA to operate the airport in San Juan, Puerto Rico through its Aerostar joint venture. The San Juan airport looks like a three to four year project with the company projecting a cap ex of $250 million for planned upgrades.
The company’s fundamentals look pretty good. Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) carries little debt, enjoys an operating profit margin just over 38%, and pays a dividend of 2.4%. Recent earnings declined despite increased traffic and revenues. The company blames increased taxes, losses connected to the San Juan airport bid, and devaluation of the peso relative to the US dollar. The stock trades at just under $116 per share, down from $141 in mid April.
Final Foolish thoughts
Of the three companies here, I like the Mexican airport firm Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) best. The underlying business seems best positioned to rebound from recent earnings setbacks. Latam would be my next choice with synergies from the corporate merger likely to grow. Again, patience will be required. Ecopetrol needs some political stability at home before I can invest with them.
The article 3 Latin American Companies Worth a Look originally appeared on Fool.com and is written by Robert Zimmerman.
Robert Zimmerman has no position in any stocks mentioned. The Motley Fool recommends Grupo Aeroportuario del Sureste (ADR) and Petroleo Brasileiro (NYSE:PBR) S.A. (ADR). Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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