Grupo Aeroportuario del Sureste SA de CV :ASR-US: Earnings Analysis: Q2, 2017 By the Numbers : July 26, 2017

Grupo Aeroportuario del Sureste SA de CV reports financial results for the quarter ended June 30, 2017.

Highlights

  • Summary numbers: Revenues of USD 157.95 million, Net Earnings of USD 60.95 million.
  • Gross margins widened from 56.04% to 56.72% compared to the same period last year, operating (EBITDA) margins now 60.91% from 59.61%.
  • Change in operating cash flow of -82.52% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 157.95 124.9 154.41 124.1 124.84
Revenue Growth (%YOY) 26.52 6.93 -10.73 -5.33 -8.8
Earnings (mil) 60.95 67.51 46.05 48.3 48.22
Earnings Growth (%YOY) 26.4 29.32 5.83 13.41 1.91
Net Margin (%) 38.59 54.05 29.82 38.92 38.62
EPS 2.03 2.25 1.54 1.61 1.61
Return on Equity (%) 4.61 5.69 4.14 4.31 4.08
Return on Assets (%) 13.04 17.84 12.37 12.85 12.69

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, ASR-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if ASR-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 26.46% and earnings by -9.72% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 56.04% to 56.72% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 59.61% to 60.91% compared to the same period last year. For comparison, gross margins were 68.21% and EBITDA margins were 71.51% in the last reporting period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

ASR-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 127.73, compared to last year’s level of 121.79 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

ASR-US‘s year-on-year change in operating cash flow of -82.52% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 53.78% to 54.97% and (2) one-time items. The company’s pretax margins are now 54.22% compared to 53.27% for the same period last year.

EBIT Margin History
PreTax Margin History

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Company Profile

Grupo Aeroportuario del Sureste SA de CV is a holding company that engages in the operation, maintenance, and development of airports through its subsidiaries. It operates through the following segments: Cancun Airport and Subsidiaries, Villahermosa Airport, Merida Airport, and Servicios. The company was founded in 1996 and is headquartered in Mexico City.

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