Latam’s Profit Surprise Boosts Worst-Performing Airline Shares

Updated on

Latam Airlines SA gained the most in almost five years after reporting better-than-forecast operating profit amid a push to reduce costs.

The world’s worst-performing airline stock in three years climbed 7.3 percent to 5,786.2 pesos at the close in Santiago, its biggest increase since August 2010. The rally was the biggest on Chile’s benchmark IPSA index, which increased 0.9 percent.

The carrier reported Thursday that its operating margin widened to 8.1 percent in the first quarter from 3.5 percent a year earlier as operating costs fell 16 percent and crude oil prices declined. Unlike some rivals, it hasn’t lowered margin estimates, Citi-Banchile analysts Stephen Trent and Fernan Gonzalez said in a research note.

“These very strong results are also inconsistent with the market’s mysteriously cautious view on the shares,” they wrote, reiterating a buy recommendation.

While shares of Latam’s peers have posted a 30 percent average annual gain in dollars in the past three years, Santiago-based Latam posted a loss of 23 percent.

Latam’s reported operating profit of $233 million, compared with the $214 million average forecast of economists. The 17 percent depreciation of Brazil’s real in the first quarter led to a net loss of $40 million for Latam.