Mexico has been in the news in recent times due to the long and protracted fight against the drug cartels. While a lot of the news coming out of Mexico has not been very positive, there are a lot of positive things coming out of Mexico. Airports have been full of passengers, meaning that airport stocks have been soaring.
There are three major airport operators, Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR), Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) and Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB). Of the three airport operators, Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) has the best chance of soaring the most, while Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) also looks well positioned for growth. Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB), on the other hand, has increased the most in the last year and it looks like like it has less upside remaining than the other two Mexican airport operators.
Where are they flying?
All three of these companies operate several airports, usually within a specific part of Mexico. Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) operates and maintains airports in such tourist hot spots as Cancun and Cozumel, among other places. Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) operates airports everywhere from big city Guadalajara to tourist hot spots Puerto Vallarta and Los Cabos to troubled Tijuana.
Tijuana is worth a special mention because while there are issues plaguing the city, it is right across the border from San Diego and offers different and cheaper flights than San Diego International Airport (Lindbergh Field).
Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) operates airports as varied as business friendly Monterrey to tourist-haven Acapulco to very troubled Ciudad Juarez. Like Tijuana, Ciudad Juarez is very close to El Paso, Texas, although the airport is not competing with El Paso International Airport at this time due to the level of violence in Ciudad Juarez.
Which airports will soar?
Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR), with its nine airports across Mexico, looks like a good bet for solid growth in the future. Looking at the last year, Grupo Aeroportuario Del Sureste is up 45.9% and its profit margin in the last year is a whopping 40.1%. Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) also has started to expand outside of Mexico; it manages Luis Muñoz Marín International Airport in San Juan, Puerto Rico in a joint venture with infrastructure investment firm Highstar Capital. The high profit margin and the fact that it is expanding outside of Mexico makes Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) the best bet out of the three Mexican airport operators.
Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) also has a very solid roster of airports. With a mix of airports in business cities, tourist cities and regional centers the airports are not necessarily dependent on one type of airline passenger. The results for Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) have been very good in the last year, with the stock up 40.2% in the last year and the profit margin was a very good 36.9%. The stock has gone down 13.4% year-to-date, which is a cause for a bit of concern, but it should be able to bounce back and keep on growing in the future.
Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) also has a mix of airports in many different places, although it has more airports in problematic areas than the other two. This combined with the fact that it has already soared so much in the past year makes this the least likely of the three to continue to soar. The stock is up 61.5%, which is the most out of the three Mexican airport operators. The profit margin was 26.9% last year, which is a good amount. The fact that Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) has gone up so much recently means that a lot of the growth is already behind it. It has taken a dip in recent times, with the stock down more than 20% this quarter.
Stuck on the runway?
There are potential problems that could cause all three of these Mexican airport operators issues. A reduction in airline passengers would most definitely cause the profits to drop at the airline operators. This reduction in airline passengers could potentially come from two causes. One is that the violence in Mexico increases, scaring off tourists. Another issue is a general slowdown in the Mexican economy. The airport operators are not only dependent on tourists from outside of Mexico but also business travelers. A slowdown in the Mexican economy would also mean a slowdown in the number of lucrative business travelers
Either of these things could cause less airline passengers, which means less people to spend money at the airports. So far, the number of airline passengers has held up but it remains to be seen whether that can hold up in the future.
Fly like a bird
All three, Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR), Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) and Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) have good prospects for the future. The Mexican airport industry has performed well and it looks likely to continue into the future. While there are some possible headwinds that all three of these airport operators might face, the possibility for strong growth outweighs the risk. It looks like the Mexican airport industry is about to take off for a long flight upward.
The article Airport Stocks Taking off in Mexico originally appeared on Fool.com and is written by Jeremy Worthington.
Jeremy Worthington has no position in any stocks mentioned. The Motley Fool recommends Grupo Aeroportuario del Pacific S.A.B (ADR) and Grupo Aeroportuario del Sureste (ADR). Jeremy is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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