Company Performance - LATAM Airlines Group reported a year-over-year increase in revenue passenger-kilometers (RPK) for May 2025 [1] - LATAM Airlines experienced a 7.2% year-over-year increase in consolidated capacity, measured in available seat-kilometers (ASK), driven by a 13% increase in Brazil's domestic capacity [2][10] - The consolidated traffic for LATAM Airlines increased by 9.6% year over year, leading to a consolidated load factor rise of 1.8 percentage points to 83.1% in May 2025 [3][10] Industry Comparison - Other airlines, such as Ryanair and Volaris, also reported traffic increases for May 2025, indicating a positive trend in air travel demand [4][8] - Ryanair transported 19.6 million passengers in May 2025, reflecting a 4% year-over-year increase, with a load factor of 95% [5][6] - Volaris reported a 9% year-over-year increase in consolidated capacity, with a 4.2% increase in passengers transported, although its load factor decreased by 4.3 percentage points to 81.8% [9]

Core Viewpoint - LATAM Airlines Group (LTM) is experiencing strong demand and operational growth, leading to positive share performance and investment opportunities [1]. Upsides for LTM - Earnings estimates for LTM have been revised upward by 33.3% for the current quarter and 22.3% for 2025, indicating broker confidence [2]. - The company's share price has significantly outperformed the Zacks Transportation – Airline industry's growth of 20.4% over the past year [3]. Growth Factors - In Q1 2025, LATAM Group expanded its consolidated capacity by 7.3%, driven by a 10.7% increase in international operations, and transported nearly 21 million passengers, a 3.6% increase from Q1 2024 [6]. - LATAM achieved a record Net Promoter Score (NPS) of 56, reflecting improved customer satisfaction, particularly among premium travelers who rated their experience with an NPS of 61 [7]. Solid Zacks Rank - LATAM Airlines Group currently holds a Zacks Rank of 1 (Strong Buy), indicating strong market confidence [5].

Market Overview - Wall Street experienced significant gains in May, with the S&P 500 increasing by 6.2% and the Nasdaq rising by 9.6%, marking the best month for both indices since late 2023 [1] - Investor optimism was fueled by a temporary pause on new trade tariffs announced by Trump, alleviating fears regarding trade tensions with China and the EU [1] Geopolitical Risks - Despite the temporary relief, the threat of tariffs remains, as China accused the U.S. of violating their trade truce by tightening controls on AI chip exports and student visas, which has raised tensions again [2] - The interconnectedness of the U.S. and Chinese economies means that even minor disputes can significantly impact market stability [2] Investment Strategy - In uncertain times, investors are turning to value investing, focusing on companies with strong fundamentals that are undervalued [3] - Value stocks with high earnings yield can provide attractive returns, especially during periods of market volatility [4] Earnings Yield - Earnings yield is calculated by dividing a company's annual earnings per share (EPS) by its current stock price, indicating potential returns for investors [5] - A higher earnings yield suggests a stock may be undervalued compared to its peers, while a lower yield may indicate overvaluation [5][7] Stock Screening Criteria - A primary screening criterion for selecting stocks is an earnings yield greater than 10%, supplemented by estimated EPS growth, average daily volume, and current price thresholds [8][9][10] - Stocks with a Zacks Rank of 1 (Strong Buy) or 2 (Buy) are expected to outperform their peers [10] Selected Value Stocks - Five value stocks with earnings yields exceeding 10% have been identified as appealing options amid rising U.S.-China tensions: AngloGold Ashanti (AU), Orchid Island Capital (ORC), LATAM Airlines (LTM), Priority Technology (PRTH), and Allianz (ALIZY) [11] - All five stocks show strong projected EPS growth through 2026 and meet liquidity, price, and growth criteria [11] Company Highlights - **AngloGold Ashanti (AU)**: Expected earnings growth of 95% in 2025 and 6.7% in 2026, with a Zacks Rank of 1 and a Value Score of A [12] - **Orchid Island Capital (ORC)**: Projected earnings growth of 394% in 2025 and 24.5% in 2026, Zacks Rank 1, Value Score B [13] - **LATAM Airlines (LTM)**: Anticipated earnings growth of 27.5% in 2025 and 20% in 2026, Zacks Rank 1, Value Score A [14] - **Priority Technology (PRTH)**: Expected earnings growth of 108% in 2025 and 34% in 2026, Zacks Rank 1, Value Score A [15] - **Allianz (ALIZY)**: Projected earnings growth of 16.4% in 2025 and 9% in 2026, Zacks Rank 1, Value Score B [16]

Core Investment Strategy - Value investing is highlighted as a reliable strategy during market volatility, allowing investors to purchase stocks at discounted prices when others sell [1][2] Value Investment Drawbacks - The concept of "value traps" is introduced, where stocks may underperform due to persistent issues rather than temporary problems [3] - Common metrics for value investing include dividend yield, P/E, and P/B ratios, which help identify discounted stocks [3] Importance of PEG Ratio - The PEG ratio, defined as (Price/Earnings)/Earnings Growth Rate, is emphasized as a crucial metric for assessing a stock's intrinsic value [4][5] - A low PEG ratio is preferred, but it has limitations, such as not accounting for changing growth rates over time [5] Screening Criteria for Value Stocks - Effective screening criteria for value stocks include: - PEG Ratio less than industry median - P/E Ratio less than industry median - Zacks Rank 1 (Strong Buy) or 2 (Buy) - Market Capitalization greater than $1 billion - Average 20-Day Volume greater than 50,000 - Percentage Change in F1 Earnings Estimate Revisions greater than 5% - Value Score of less than or equal to B [6] Selected Stocks - Urban Outfitters (URBN) is a lifestyle retailer with a Zacks Rank 1 and a five-year historical growth rate of 20% [9][8] - Dentsply Sirona (XRAY) is a leader in dental products with a Zacks Rank 2 and a long-term expected growth rate of 7.4% [10][11] - LATAM Airlines (LTM) offers extensive air transportation services with a Zacks Rank 1 and a five-year expected growth rate of 14.8% [11][12] - Exelixis (EXEL) focuses on cancer therapies with a long-term expected earnings growth rate of 21% and a Zacks Rank of 2 [12][13]

Company Performance - Knot Offshore (KNOP) has gained approximately 15.6% year-to-date, significantly outperforming the Transportation sector, which has returned an average of -8.3% [4] - The Zacks Consensus Estimate for KNOP's full-year earnings has increased by 34% over the past quarter, indicating improved analyst sentiment and a stronger earnings outlook [3] Industry Comparison - Knot Offshore is part of the Transportation - Shipping industry, which consists of 36 individual stocks and currently ranks 173 in the Zacks Industry Rank. This industry has experienced an average loss of 6.3% year-to-date, further highlighting KNOP's superior performance [5] - In contrast, LATAM (LTM), another stock in the Transportation sector, has achieved a year-to-date return of 37% and belongs to the Transportation - Airline industry, which is ranked 136 and has declined by 10.6% year-to-date [4][6] Zacks Rank - Knot Offshore currently holds a Zacks Rank of 2 (Buy), suggesting a favorable outlook for the stock in the near term [3] - LATAM has a Zacks Rank of 1 (Strong Buy), with its current year EPS consensus estimate increasing by 22% over the past three months [5]

Core Insights - LATAM Airlines Group S.A. has experienced a significant resurgence, driven by strong financial performance and strategic enhancements, positioning it as an attractive investment opportunity [1] Financial Performance - In Q1 2025, LATAM reported revenues of $3.41 billion, a 2.7% year-over-year increase, surpassing the Zacks Consensus Estimate of $3.38 billion [2] - The airline's earnings for the period were $1.18, significantly exceeding the Zacks Consensus Estimate of 61 cents [2] - LATAM transported 21 million passengers during this period, reflecting a 3.6% increase from the previous year [3] Growth Projections - The airline has revised its available seat kilometer (ASK) growth forecast for 2025 to between 7.5% and 9.5%, up from the previous estimate of 7% to 9% [4] - In April, LATAM transported over 6.7 million passengers, marking a 7.6% increase compared to the same month last year [4] Infrastructure and Market Developments - Significant infrastructure investments in Latin America, such as upgrades to São Paulo-Guarulhos International Airport and new airports in Mexico City and Tulum, are enhancing connectivity and operational efficiency [5] - The World Travel & Tourism Council projects that Latin America's travel and tourism sector could contribute nearly $260 billion to the region's economy over the next decade, benefiting LATAM through increased passenger volumes [5] Competitive Positioning - LATAM holds a Zacks Rank 1 (Strong Buy) and has outperformed its Zacks Peer Group with a 36.8% growth over the past six months [6] - The airline is enhancing customer experience through fleet upgrades, expanded Wi-Fi capabilities, and the introduction of premium economy and new business class cabins, achieving a Net Promoter Score (NPS) of 56, the highest in its history [6] Sustainability Commitment - LATAM has been recognized in the S&P Global Sustainability Yearbook for its strong environmental, social, and governance (ESG) practices, reinforcing its commitment to sustainable growth [7] Strategic Outlook - The airline's strategic network expansion, fleet modernization, enhanced customer service, and operational efficiency position it as a leader in the Latin American aviation market, presenting a promising opportunity for investors [10]

LATAM Airlines Group Performance - LATAM Airlines Group reported a year-over-year increase in revenue passenger-kilometers (RPK) for April 2025 [1] - The company experienced a 6.9% year-over-year increase in consolidated capacity, measured in available seat-kilometers (ASK), primarily driven by a 10% increase in international operations [2] - LATAM Airlines transported over 6.7 million passengers in April 2025, marking a 7.6% increase year-over-year, and has transported nearly 28 million passengers year to date [4] - The consolidated load factor rose 2.3 percentage points to 83.4% in April 2025, indicating strong demand as traffic outpaced capacity expansion [3] Competitor Performance - Copa Holdings reported a 5.2% year-over-year increase in available seat miles (ASM) and a 5.5% increase in revenue passenger miles (RPM) for April 2025, with a load factor of 86.8% [6][7] - Ryanair transported 18.3 million passengers in April 2025, reflecting a 6% year-over-year increase, with a load factor of 93% [8][9] - Ryanair operated over 103,000 flights in April 2025, an increase from previous months, indicating a recovery in operational capacity [10]

Core Insights - The article discusses the investment strategy of GARP (Growth at a Reasonable Price) as a hybrid approach that combines elements of both value and growth investing, particularly in uncertain market conditions [2][3][5]. Investment Strategy - GARP investing prioritizes the PEG (Price/Earnings Growth) ratio, which relates a stock's P/E ratio to its future earnings growth rate, providing a more comprehensive view of a stock's potential [5][6]. - A lower PEG ratio, ideally below 1, indicates both undervaluation and future growth potential, making it attractive for GARP investors [6]. Stock Performance - Several stocks have shown significant success using the GARP strategy, including Takeda Pharmaceutical, Five9, LATAM Airlines, and Mizuho Financial Group [4]. - Takeda Pharmaceutical has a Zacks Rank of 1, a Value Score of A, and a long-term expected growth rate of 35% [11]. - Five9 holds a Zacks Rank of 2, a Value Score of B, and a historical growth rate of 19.3% [13]. - LATAM Airlines also has a Zacks Rank of 1, a Value Score of A, and an expected growth rate of 14.8% [14]. - Mizuho Financial has a Zacks Rank of 2, a Value Score of B, and a long-term expected growth rate of 15.9% [16]. Screening Criteria - Effective GARP investing involves screening for stocks with a PEG ratio less than the industry median, a P/E ratio below the industry median, a Zacks Rank of 1 or 2, a market capitalization greater than $1 billion, and an average 20-day trading volume exceeding 50,000 [8][9].

Company Performance - LATAM (LTM) has returned 16% year-to-date, outperforming the average return of -11.4% for Transportation companies [4] - The Zacks Consensus Estimate for LATAM's full-year earnings has increased by 14% over the past quarter, indicating improved analyst sentiment [4] - LATAM currently holds a Zacks Rank of 1 (Strong Buy), suggesting it is poised to outperform the broader market in the next one to three months [3] Industry Comparison - LATAM is part of the Transportation - Airline industry, which has seen an average loss of 21.9% year-to-date, further highlighting LATAM's strong performance [6] - In contrast, Westinghouse Air Brake Technologies (WAB), another outperforming stock in the Transportation sector, has only increased by 1% year-to-date [5] - The Transportation sector as a whole is ranked 16 in the Zacks Sector Rank, with LATAM being one of 125 individual stocks in this sector [2]

Group 1 - LATAM Airlines successfully emerged from Chapter 11 and its shares were relisted last year [1] - The stock price of LATAM Airlines has gained 17% since the last report, contrasting with a 3.2% loss in the broader market [1] - The Aerospace Forum focuses on discovering investment opportunities in the aerospace, defense, and airline industry, leveraging data analytics for informed analysis [1] Group 2 - The analyst provides context to developments in the aerospace industry, highlighting significant growth prospects [1] - The investing group offers direct access to data analytics monitors, enhancing investment decision-making [1]