Volaris Aviation (VLRS, Financial) has been one of my best performing long recommendations and the carrier has continued to perform nicely. Although I recently recommended investors to book some profits by selling the stock, it can still offer more upside as evident by the company’s latest earnings. Hence, I think investors can still consider adding the stock to their portfolios.
Another beat
Volaris Aviation has beaten earnings every time since I have recommended buying the stock, and the latest quarter was no exception. Volaris Aviation reported its first quarter earnings today and reported EPS of 34 cents, beating the analysts’ estimates by 5 cents. On the revenues front, Volaris reported revenues of $298 million, up 20% year over year, beating the estimates by a fine margin of almost $16 million.
While other airlines have struggled to increase their revenue amid weak air fares environment, Volaris Aviation, thanks to its growing efficiency, managed to beat the revenue estimates as well.
Also, the growing Mexican aviation market played an important role in Volaris’ beat. And with the demand for air travel in Mexico expected to grow consistently over the next few years, I don’t see any reason why Volaris can’t continue outperforming in the foreseeable future.
International expansion
Apart from strong demand in its domestic market, international expansion has been key to Volaris’ outperformance over the last few months. In the latest reported quarter, Volaris’ average seat mile grew 35% on the international front year over year, whereas its overall average seat mile only increased 25%.
The carrier expects demand in both the U.S. and Mexico to remain strong this year and will probably continue expanding to meet the demand without flooding the market with overcapacity. Given the strong growth, I think investors can still bet on Volaris Aviation as the company’s smart expansion has been successful in the recent past.
Conclusion
Although I have recommended investors to take profits off the table, I think Volaris still has more upside to offer. Volaris’ strong expansion has been key to its growth over the past, and given that growth in both its key markets is still expected to be strong, I see no reason why Volaris still can’t continue moving higher. With crude oil still hovering around $40 per barrel, Volaris Aviation is saving a lot of money and is also working on bringing down costs. All in all, I think Volaris is still a decent buy.
Disclosure: The author doesn’t have any position in the stocks mentioned in the article.
