Rating Change #3
Lan Airlines SA (LFL) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 19.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- 36.60% is the gross profit margin for LAN AIRLINES SA which we consider to be strong. Regardless of LFL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LFL's net profit margin of 7.20% compares favorably to the industry average.
- LAN AIRLINES SA's earnings per share declined by 31.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, LAN AIRLINES SA reported lower earnings of $0.95 versus $1.23 in the prior year. This year, the market expects an improvement in earnings ($1.30 versus $0.95).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Airlines industry and the overall market, LAN AIRLINES SA's return on equity exceeds that of both the industry average and the S&P 500.
Lan Airlines S.A., together with its subsidiaries, provides passenger and cargo air transportation services. The company offers air cargo transportation services to other international air carriers, freight-forwarding companies, export oriented companies, and individual consumers. The company has a P/E ratio of 30.4, equal to the average transportation industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Lan Airlines has a market cap of $9.73 billion and is part of the services sector and transportation industry. Shares are up 20.7% year to date as of the close of trading on Tuesday.You can view the full Lan Airlines Ratings Report or get investment ideas from our investment research center.
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