Zacks_Analysts' Blog : TAM Reports Weak 3Q - Analyst Blog

On November 10, 2011, TAM S.A. (TAM) reported its financial results for the third quarter of fiscal year 2011. TAM reported a net loss of R$619.7million (US$380.2 million) in the quarter, down drastically from the net income of R$733.5 million (US$421.6 million) in the year-ago quarter.

Earnings per share entered the negative territory and recorded a loss of R$4.0 per share (US$2.45 per ADR) compared with the positive EPS of R$4.7 per share (US$2.7 per ADR) reported in the year-ago quarter.

In the third quarter, net revenue was R$3,319.5 million (US$2,036.5 million), up 13% year over year and 8.7% sequentially. The year-over-year improvement was primarily due to higher international load factor along with rising passenger demand in the quarter.

Passenger revenues and the overall cargo revenues in the third quarter reached R$2,585.9 million (US$1,586.4 million) and R$294.4 million (US$180.6 million), representing year-over-year growth of 9.2% and 6.5%, respectively.

Total operating expenses in the third quarter increased 22.5% year over year and decreased 8.9% sequentially to R$2,766.1 million (US$1,697 million). The year-over-year increase was mainly due to a rise in the cost of fuel, personnel, third party services etc.

EBITDA in the third quarter was R$739.1 million (US$453.4 million), down 13.8% y/y, with a margin of 22.3% compared with 29.3% in the corresponding quarter of 2010.

Exiting the third quarter, financial liability was recorded at R$1,865.5 million (US$1,019.4 million) versus R$6,375.2 million (US$4,010 million) in the previous quarter. Cash and cash equivalents were recorded at R$515 million (US$281.4 million) versus R$892.6 million (US$569 million), sequentially.

During the quarter, net cash generated from operating activities was R$63.6 million (US$39 million), down 85.3% on a year-over-year basis. Purchases of property, plant and equipment were recorded at R$2.5 million (US$1.53 million) compared with a negative R$28.3 million (US$16.3 million), in the year ago quarter.

TAM S.A., operating through its subsidiaries TAM Linhas Aéreas and TAM Mercosur, is a renowned air transportation services provider, both in the domestic and international markets. TAM competes directly with its peers, such as AMR Corporation (AMR) and GOL Linhas A (GOL).

Tam S.A. has a Zacks #2 Rank, which translates into a short-term Buy rating (1-3 months).