Earlier today, Air Canada (TSE: AC) (OTC: ACDVF) reported Q3-2022 results that missed earnings-per-share (EPS) expectations but beat revenue expectations. The company also provided solid full-year estimates that imply more recovery ahead.
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Air Canada’s operating revenue reached C$5.32 billion compared to the consensus estimate of about C$5.02 billion, representing a ~2.5x growth rate. However, its diluted earnings per share (EPS) were -C$1.42, compared to -C$1.79 last year, while analysts were expecting positive earnings of C$0.44. C$951 million of its C$508 million net loss came from losses in currency fluctuations.
Nonetheless, Air Canada did have a positive net cash flow of C$290 million, but this was about 5% lower compared to Q3 2021. Notably, Air Canada reported a 12.1% operating margin, which is the first time it was positive since the start of the pandemic. Also, its EBITDA margin came in at 19.9%, as the company generated EBITDA of $1.06 billion, much higher than the -$67 million from Q3 2021. Additionally, AC’s operating capacity, which is calculated using Available Seat Miles (ASMs), met the company projections from Q2, increasing by over 100% year-over-year and reaching 79% of Q3-2019 levels.
Air Canada’s Q4 and Full-Year Outlook
Regarding Q4, Air Canada only gave guidance for its ASM capacity, which is expected to rise by roughly 60% year-over-year, coming in at 85% of Q4-2019 capacity.
For the full year, the company expects these levels to reach ~73% of 2019 levels (a 148% increase year-over-year). Also, AC expects its EBITDA margin to be between 8% to 11%.
Is Air Canada a Good Stock to Buy, According to Analysts?
According to analysts, Air Canada earns a Strong Buy consensus rating based on eight Buys, three Holds, and zero Sells assigned in the past three months. The average Air Canada price target of C$26.54 implies 33.4% upside potential.
Conclusion: Air Canada’s Mixed Results Pleased Investors
Despite a big earnings miss, the company’s revenue beat and other metrics were enough to satisfy investors, as the stock is currently trading higher on the day. Analysts are also optimistic about the company’s rebound potential, giving it a Strong Buy rating.
