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Here's Why Investors Should Steer Clear of Azul Stock Now

Shares of Azul AZUL have had a tough run on the bourses lately. In the past three months, shares of this Latin American carrier inched up 0.9% compared with its industry’s 10.1% growth.

Let’s delve deep to unearth the factors hurting Azul’s performance.

We are concerned about Azul's high debt levels. Evidently, Azul's gross debt increased 17.5% year over year at the end of third-quarter 2019. Additionally, high costs and the depreciation of the Brazilian currency are major headwinds for the company.

In the third quarter, operating expenses increased 24.2% owing to a 30.7% rise in salaries, wages and benefits. In the first nine months of 2019, operating expenses increased 24.1%, partly due to the 29.1% rise in costs pertaining to salaries, wages and benefits.

Additionally, Azul incurred a non-cash foreign currency loss to the tune of R$879.4 million during the September quarter, mainly due to the 8.7% depreciation of the Brazilian real. In the first nine months of 2019, the company suffered foreign exchange-related losses to the tune of 9.5 million.

Economic unrest is an added concern for Azul, which competes with the likes of GOL Linhas GOL, LATAM Airlines LTM and Copa Holdings CPA in the Latin-American aviation space. For instance, the truck drivers' strike in Brazil last year significantly disrupted the carrier’s operations. Consequently, the company had to cancel multiple flights due to a dearth of jet fuel in several of its airports.

Estimate Revisions & Zacks Rank

Downward estimate revisions highlight the pessimism surrounding the stock. In fact, the Zacks Consensus Estimate for 2019 earnings has been revised 20.8% downward over the past 60 days.

Given this bleak backdrop, Azul’s Zacks Rank #4 (Sell) is well justified and we believe investors should discard this stock from their portfolios at the moment.

You can see https://www.zacks.com/stocks/buy-list/?ADID=zp_1link&ICI... _1link">the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Gol Linhas Aereas Inteligentes S.A. (GOL): Free Stock Analysis Report
 
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