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Bloomberg
Canada, already the nation’s top-performing industrial stock this year, surged again after raising its profit outlook as the airline’s international expansion bolsters demand.
The addition of 16 overseas and US routes is drawing more passengers using Canada as a stopover on their way to other destinations, the company said in a statement. Air Canada said it flew close to 167,000 people on June 29, a record, while fuel costs and pricing power remained stable in the quarter.
The increase in customers comes as Air Canada benefits from plans to renew its fleet with more fuel-efficient aircraft such as the Boeing Co. 787 Dreamliner, which is driving down costs and improving profit margins. The expansion of the Rouge discount unit is drawing customers and a debt refinancing completed last year also helped reduce expenses.
“The outlook appears to be very constructive and implies material upside to estimates,’’ Fadi Chamoun, a BMO Capital Markets analyst, said in a note to clients. “The results underscore a significantly stronger demand environment than anticipated alongside a very robust execution.’’
Air Canada jumped 9.6 percent to C$21.74 in Toronto, its highest closing price since the company returned to the stock market in 2006. The shares have gained 59 percent this year, while a sub-index of Canadian industrial stocks advanced 7.5 percent for the period.
Earnings before interest, taxes, depreciation, amortization, impairment and aircraft rent will climb to 17 percent to 19 percent of revenue in 2017 and 2018, the Montreal-based carrier said in the statement. The forecast compares with a range of 15 percent to 18 percent disclosed May 5.
The company said it would hold an investor day Sept. 19.
Profit Beats
Second-quarter adjusted earnings of 78 Canadian cents were more than double the 38-cent average of analysts’ estimates compiled by Bloomberg. Revenue of C$3.91 billion ($3.13 billion) also beat the C$3.79 billion average estimate.
“We’ve made significant progress over the last several years, and these record financial results are clear evidence of the successful execution of our business plan,†Chief Executive Officer Calin Rovinescu said on a conference call.