We recently published a list of the 10 Worst Airport Stocks to Buy. In this article, we are going to take a look at where Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) stands against the other airport stocks to buy.
Air travel plays a significant role in the global economy as it directly contributes to economic growth by facilitating trade and tourism. The aviation industry generates millions of jobs worldwide, both directly and indirectly.
The industry was hit quite hard by the pandemic and later the Russia-Ukraine conflict. However, it has experienced a remarkable resurgence in passenger demand, which is surpassing pre-pandemic levels and signaling a strong recovery for the aviation industry.
Bain & Company forecasts reveal that annual air travel demand is on track to exceed pre-pandemic levels, specifically measured by revenue passenger kilometers (RPK). By 2030, the global RPK is expected to reach 11.4 trillion, which represents 136% of the 2019 volume.
Moreover, the Airports Council International (ACI) World released its 2024 Annual World Airport Traffic Report on September 19 where the council compiled data from over 2,700 airports across more than 180 countries.
The council forecasts a 10% increase in global passenger traffic for 2024, at approximately 9.5 billion. In 2023, passenger traffic hit 8.7 billion, representing a 30.6% increase from 2022 and recovering 95% of pre-pandemic levels.
For 2024, the passenger numbers are expected to exceed 4% of pre-pandemic numbers. Data from the first half of 2024 shows an 11% year-over-year increase in passenger numbers, as international travel increased by 17%. The report projects domestic travel will account for 5.4 billion passengers, while international travel is expected to reach 4.1 billion.
Artificial Intelligence: Transformative Trend In Airline Industry
Using AI in the airline industry marks a significant change toward improving efficiency and customer satisfaction. It shows how technology can make services better while still keeping the important human touch in operations. We discussed this in our article about 11 Worst Aviation Stocks to Buy According to Analysts. Here is an excerpt from the article:
“Like most industries of today, airlines are also implementing AI to improve the efficiency of their operations. According to an August report by CNBC, these companies are using AI for tasks like ground control, customer service, and optimizing flight routes.
American Airlines introduced its AI-powered “smart gating” system at its Dallas-Fort Worth control center. The tool automatically assigns gates to incoming flights, which cut runway taxi time by around 20%, or two minutes per flight, across five airports. The system also helps passengers, baggage, and crews make quicker connections, which improves overall efficiency.
Alaska is using AI to streamline flight paths and optimize aircraft turnaround times at gates. Its tool is described as “Waze for the skies,” and it uses AI to plan faster routes, which saves fuel and reduces delays. Additionally, the system monitors ground operations as it tracks when fuel, catering, and baggage trucks arrive and depart, which allows agents to address delays immediately.
United has implemented generative AI for customer service, especially during flight disruptions. The AI generates detailed, empathetic messages explaining delays, which has increased customer satisfaction by 4% since its rollout on 6,000 flights.”
Moreover, the report by CNBC stated that AI will not be significantly replacing human labor. Instead, it will help humans work more efficiently.
Our Methodology
For this article, we used the Yahoo Finance stocks screener along with ETFs and online rankings to identify over 20 airport or airport related stocks. We narrowed our list to 10 stocks with the lowest average analyst price target, as of September 26. The stocks are listed in descending order of their average price target. We also added hedge fund sentiment around the stocks that trade on the NYSE and NASDAQ, which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in 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).
Is Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) One of the Worst Airport Stocks to Buy?
Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR)
Number of Hedge Fund Holders: 6
Average Analyst Price Target Upside: 12.16%
Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR), also known as ASUR, is a prominent Mexican airport operator based in Mexico City. It was established in 1998 as part of a government initiative to allow private investment in Mexico’s airport infrastructure.
According to its 2023 annual report, the company operates nine airports in southeastern Mexico. Some of the major ones include Cancún, which was the second busiest in Mexico in 2023 for passenger traffic and the busiest for international passengers. The company also manages airports in Cozumel, Huatulco, Mérida, Minatitlán, Oaxaca, Tapachula, Veracruz, and Villahermosa.
In Colombia, ASUR (NYSE:ASR) owns a controlling stake in Airplan, which operates multiple airports, including those in Medellín and Rionegro. Additionally, its subsidiary Aerostar manages the LMM Airport in San Juan, Puerto Rico, under a 40-year lease from February 2013.
The company’s revenue streams include aeronautical services, non-aeronautical services, and construction services. Aeronautical services, which are heavily regulated, usually generate the largest portion of revenue, followed by non-aeronautical services, which include commercial activities like leasing space to retailers and restaurants.
With an average price target of $321.02 among 17 analysts, ASUR (NYSE:ASR) has an average price target upside of 12.16%. While it makes it to the list of worst airport stocks to buy, recently analysts have been bullish on the stock.
On September 8, The Fly reported that Goldman Sachs analyst Joao Frizo resumed coverage of it with a Buy rating and a $338 price target. The firm believes that Mexican airports, including Asur, are a good investment because they are expected to grow their earnings strongly.
It also thinks that the current economic conditions are favorable for these companies. However, the firm also pointed out that there may be some increased risk from government regulations in Mexico after the upcoming presidential elections.
Overall, ASR ranks 5th on our list of the worst 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 timeframe. 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.