TAM S.A.
(TAM) reported a net loss of R$58.1 million (US$32.5 million) during the first quarter of fiscal 2010 compared with an income of R$25.7 million (US$11.1 million) in the year-ago quarter. This was driven by the foreign exchange loss of $163 million during the quarter.
 
Reported loss per share was R$0.58 or 32 cents per ADR compared with an EPS of R$0.37 or 16 cents per EPADR in the corresponding period of 2009 and 12 cents as anticipated by the Zacks Consensus Estimate.
 
During the quarter, net revenue was R$2,603.8 million (US$1,458.1 million), slightly down from R$2,617.8 million (US$1,125.7 million) in the first quarter of 2009 primarily due to a 3.2% decrease in domestic flight revenue. Domestic revenue dipped to R$1,396.8 million (US$782.2 million) because of slower return of business passengers.
 
International flight revenue and cargo revenue spiked 2.4% and 22.8% year over year, reaching R$ 815.8 million (US$456.8 million) and R$256.0 (US$143.4 million), respectively, based on the global economy recovery.
 
Total cost of service and operating expense grew 0.9% year over year; as a percentage of revenue, it went up 130 basis points. The increase was based on a higher fuel cost and higher selling and marketing expense.
 
EBITDAR (excluding aircraft rent) for the quarter dropped to R$376.5 million (US$210.8 million) with a margin of 14.5% from R$476.1 million with a margin of 18.2% in the same quarter of 2009.
 
TAM continued with its fleet development and renovation strategy and received 3 new A319 aircraft and 5 ATR-42s from Pantanal during the quarter. By the end of 2010, Tam will receive another A319, 3 A320s and 2 A321s.
 
Net debt at the end of the quarter was R$7,628.1 million (US$4,271.7 million). During the quarter, cash flow from operating activities was negative R$369.0 million (US$206.6 million) from positive R$226.1 million in the year-ago quarter based on the net loss reported during the first quarter.
 
TAM Airlines remains well positioned to benefit from the favorable outlook of the global economic recovery. However, the huge volatility in fuel prices puts a Hold recommendation on the stock.

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