What does guidance in Mexican Transportation look like? And what should it look like?

Notes: 

• GMXT used to provide annual guidance on volume growth, revenue growth, and CapEx through earnings presentations (range estimates for volume and revenue, point estimates for CapEx). So far, no guidance for 2022 has been provided. 

What can we read from this table? 

Most of the sector has a guidance strategy (5 out of the 7 companies). This is a pleasant surprise in the Mexican market and makes Transportation the sector that provides the most guidance to investors and analysts. We believe this statistic in part has to do with many companies tied to master development plans under their concessions (and these plans being publicly available, so there is no downside in sharing this very openly). But it goes beyond that since most companies guide beyond CapEx (with an average of 4 metrics per company being included in the guidance).  

The most popular metrics beyond CapEx were operating revenues and EBITDA margin. Reporting frequency was split between annual and quarterly updates. We also note that most of them used a good number of channels to communicate their estimates, which we consider to be a best practice. 

So, what do the largest Transportation companies (by market cap) in the world do?  

• Southwest Airlines: offers its guidance on a quarterly basis, using range and point estimates. This is done in their earnings reports and calls, and corporate presentations; including the following metrics: Operating revenue, ASMs, economic fuel costs per gallon, fuel hedging premium expense per gallon, fuel hedging cash settlement per gallon, ASMs per gallon, CASM-X, scheduled debt repayments, interest expense, aircraft, effective tax rate, and CapEx. 
• Delta Airlines: guides on Capacity, revenue, CASM-Ex, fuel price, operating margin, CapEx, and Net Debt. This is also done quarterly in its earnings reports and calls and corporate presentations, using range and point estimates. 
• Aena: updates its guidance when necessary, using range estimates in its earnings reports and calls and press releases. They focus solely on reporting on their traffic metric. 

Source: Company Materials 

We looked at two airlines and one airport operator. The airlines provide even more in-depth guidance than Mexican peers (Southwest has 12 metrics included in its guidance!). The airport is a bit more opaque and focuses on guiding traffic growth (which is currently benchmarked against pre-pandemic levels). Airlines update their guidance numbers every quarter, while Aena seems to do so only when they deem it necessary. 

What should we learn from this? 

It seems that being very open and transparent with guidance is the norm in transportation stocks around the world, so Mexican peers would be better off by also following this trend (since investors are more likely to expect it from them given what their peers do). As we mentioned previously, most of the local peers do, but we always advise to have these kinds of strategies available for the market’s understanding. 

If you feel like you need some assistance with defining a best-in-class guidance strategy, don’t hesitate to give us a call. At Miranda IR we’d be happy to help!