The Bank maintains its target for Transat shares at $3.75. It was trading at $4.13 on Wednesday when the markets closed. (Photo: 123RF)
Revenues and profits on the rise. Transat (TRZ) presented the results of its third quarter of 2023 on Thursday morning, which contrast with those of last year at the same period. On the other hand, engine problems at Pratt and Whitney, which equip Airbus A320s, are causing some concern among analysts who follow the company’s activities.
For the months of June, July and August, Transat posted revenues of $746.3 million, or $238 million more than the corresponding period last year. This is an increase of 47%. Analysts expected $729 million.
The Quebec company’s profits stand at $57M, at $1.49 per share, compared to a loss of $106M ($2.82 per share) at the same date last year. A significant recovery also marks the operating result which ends the year with a surplus of $64.4M, light years away from the operating loss of $93.2M for the third quarter of 2022.
“These results demonstrate our overall quality of execution and our ability to meet sustained customer demand in a cost-effective manner. Third quarter revenue of $746.3M was 6.8% higher than 2019 levels, despite a 14% decline in capacity, and our record adjusted EBITDA of $114.8M increased nearly 85% . Strong demand for leisure travel generated returns 29% higher than those of 2019,” said Annick Guérard, President and CEO of Transat in a press release released Thursday morning.
Engine problems on the horizon
Anticipated wear problems from Pratt and Whitney’s PW1100G-JM engines are increasingly on the horizon for the Quebec carrier. The latter, which equip the Airbus A321LR aircraft (longer range version of the Airbus A320 neo) are already causing significant headaches for the parent company of Pratt & Whitney, RTX, which will record a charge between 3 and 3.5 billion of US dollars (G$) in the coming months due to the problem. In Europe, several hundred planes have already been grounded since the start of the year in order to carry out checks.
“According to our understanding and our discussions with Pratt & Whitney, the impacts will be minimal in 2024,” Annick Guérard responded to analysts. “This will give us time to work on a contingency plan for the year 2025. We will be in a better position to assess the impacts when Pratt & Whitney publishes its service bulletin. We are waiting to know more from their side,” continued the CEO of Transat. The latter also affirmed that the company had reserve engines, but that it did not yet know exactly the number of planes which could be impacted.
“Record customer deposits for a third quarter demonstrate the resilience of demand, which should allow Transat to further improve its financial situation,” commented Patrick Bui, Chief Financial Officer of Transat. (P
The appetite of travelers does not diminish
After the significant turbulence of the pandemic period, demand appears to be solid among travelers. Deposits for upcoming trips totaled $819.9M, an increase of 34% compared to the end of July 2019, and 40% compared to the third quarter of 2022.
“Record customer deposits for a third quarter demonstrate the resilience of demand, which should allow Transat to further improve its financial situation,” commented Patrick Bui, Chief Financial Officer of Transat.
The announced sale of land worth $50M in Mexico will go towards debt reduction, the company also announced. At $1.5 billion, it nevertheless remains a source of concern. “We will soon present a plan to refinance our debt,” confided Patrick Bui during a call with analysts.
“The solid third quarter results and positive outlook for Transat are encouraging. We continue to see Transat show improvement in its margins and liquidity. That said, we continue to remain cautious regarding the value of the stock,” commented National Bank analyst Cameron Doerksen.
The Bank maintains its target for Transat shares at $3.75. It was trading at $4.27 at midday.
Subscribe for free to the newsletters Deals and follow economic and financial news in Quebec and internationally, delivered directly to your email inbox.
With our three daily newsletters, sent in the morning, at noon and in the evening, stay up to date with the ups and downs of the stock market, the news of the day and find opinion posts from our guest experts who raise the issues that concern the business community .
#Transat #returns #profit #engines #surveillance