We recently compiled a list of the 10 Best Airport Stocks To Buy. In this article, we are going to take a look at where Grupo Aeroportuario del Sureste SAB de CV (NYSE:ASR) stands against the other airport stocks.
Passenger Traffic Rebound: Airport Industry Poised for Growth
The airport industry plays a crucial role in facilitating global connectivity, enabling the movement of people and goods across borders. The performance of the airport sector can significantly influence economic growth and development worldwide.
Passenger traffic in the global air travel industry is experiencing a strong rebound as it recovers from the impact of COVID-19. According to Airports Council International (ACI), global passenger volume is projected to reach approximately 8.7 billion in 2023, which is 95% of the pre-pandemic levels seen in 2019. This represents a significant year-over-year growth of 31% from 2022 levels. Looking ahead, 2024 is expected to be a landmark year, with passenger numbers predicted to surpass 2019 levels for the first time since COVID-19, reaching around 9.7 billion passengers, or 106% of the 2019 volume. This represents a 12% year-over-year growth from 2023 levels.
The long-term outlook for the airport and air travel industry is also promising, with total passenger traffic expected to grow at a compound annual growth rate (CAGR) of 4.3% from 2023 to 2042. ACI forecasts indicate that by 2042, global passenger traffic could nearly double the 2024 projection, reaching close to 20 billion passengers.
However, factors such as high global inflation, slowdown of global GDP, extreme weather events, and geopolitical conflicts could introduce substantial risks and uncertainties in future forecasts.
Prioritizing Sustainable Growth and Efficiency
As the airport industry expands, sustainability and efficiency have become key focuses. Airports are implementing energy-efficient lighting and exploring the use of sustainable fuels to lessen their environmental impact.
London Heathrow Airport, one of the busiest airports in the world, is among the airports that are committed to sustainability. Since 2017, the airport has been sourcing 100% renewable electricity to power its terminals. As part of its sustainability strategy, the airport aims to cut carbon emissions on the ground by at least 45% by 2030 compared to 2019 levels. This includes enabling passengers to access the airport sustainably, transitioning to zero-carbon vehicles, and investing in efficient infrastructure.
Airports are committed to optimizing operations and enhancing the passenger experience, while also making significant investments in infrastructure upgrades to support future growth.
On August 30, Bloomberg reported that Schiphol Group NV, the owner of Amsterdam Airport, has announced a significant investment of EUR 6 billion ($6.7 billion) over the next five years to upgrade the airport’s infrastructure. This investment is the largest in the airport’s history and it will focus on renewing essential systems such as baggage handling, climate-control systems, escalators, and taxiways. The airport is also seeing a recovery in passenger traffic, with expectations of welcoming between 65 million and 68 million travelers in 2024.
The airport industry remains resilient and focused on delivering a seamless and sustainable travel experience for passengers. With continued investment and innovation, the sector is well-positioned for long-term growth and success. Now that we have discussed some of the key trends in the global airport industry, let’s take a look at the 10 best airport stocks to buy.
Methodology
To compile our list of the best airport stocks to buy, we first consulted stock screeners from Finviz and Yahoo Finance, along with online rankings, to create an initial list of the largest publicly traded airport companies. From this list, we selected the stocks that analysts believe have the most potential for growth. We ranked the best airport stocks to buy based on their average price target upside potential according to analysts, as of September 11, 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An aerial view of the Luis Muñoz Marín International Airport, showcasing its strategic role in the industry.
Grupo Aeroportuario del Sureste SAB de CV (NYSE:ASR)
Average Price Target Upside Potential According to Analysts: 15.84%
Average Share Price Target Projected by Analysts: $311.94
Grupo Aeroportuario del Sureste SAB de CV (NYSE:ASR), commonly known as ASUR, is a Mexican company that holds the concessions to operate, manage, and develop 9 airports in the southeast region of Mexico. ASUR operates six airports in northern Colombia, including Medellín’s international airport, the second busiest in Colombia. Additionally, the company holds a 60% stake in the capital stock of Aerostar Airport Holdings, LLC, operator of Luis Muñoz Marin International Airport in San Juan, the capital of Puerto Rico. The airport serves as a key entry point for international flights to the island as well as continental flights from the US.
In the second quarter of 2024, total passenger traffic reached nearly 18 million, marking a 3% increase year-over-year. Growth in Puerto Rico and Colombia helped offset a nearly 5% decline in Mexico, where domestic traffic was affected by Pratt & Whitney engine issues and reduced capacity at Mexico City Airport. Colombia saw the highest growth, with a 21% increase in traffic, while Puerto Rico experienced a 9% year-over-year rise.
ASUR also benefits from non-aeronautical revenue sources, including retail, food services, and leasing, which provide further stability and growth opportunities. In the Q2 2024 earnings call, management shared that Grupo Aeroportuario del Sureste SAB de CV (NYSE:ASR) is focused on expanding its commercial offerings, having opened 45 new commercial spaces in the last year. This includes 17 locations in Mexico, 4 in Puerto Rico, and 33 in Colombia. As a result, commercial revenues grew by 7% year-over-year, with increases of 4% in Mexico, 9% in Puerto Rico, and a remarkable 40% in Colombia. Commercial revenue per passenger rose by 5% year-over-year to nearly MXN 128 in Q2 2024.
During the Q2 2024 earnings call, CEO Adolfo Castro reported that Grupo Aeroportuario del Sureste SAB de CV (NYSE:ASR) maintains a strong financial position, holding nearly MXN 15 billion in cash and cash equivalents. It also paid out MXN 6.3 billion in dividends this quarter. This includes a cash dividend of MXN 10.926 per share and an extraordinary cash dividend of MXN 10 per share, demonstrating the company’s commitment to returning value to shareholders while maintaining a healthy cash balance.
Over the past 10 years, Grupo Aeroportuario del Sureste SAB de CV (NYSE:ASR) has delivered impressive growth, with both its top line and bottom line expanding by an average of 17% annually. A robust financial performance combined with its cheap valuation presents a compelling investment opportunity. ASR is trading at only 11.85 times its forward earnings, a 38% discount to its sector.
Analysts are also bullish on ASR. The 12-month median price target of $311.94 set by analysts indicates a potential upside of 15.84% from the current stock price.
Overall ASR ranks 8th among the best airport stocks to buy. While we acknowledge the potential of ASR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ASR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
