Grupo Aeroportuario Del Pacifico (PAC-NYSE, $141.82) Reports a Record Q3 Result for the Period Ended 09/30/22.

(Results converted from MX Pesos to USD using rate of 20.1246 MX Pesos to USD on 09/30/22.)

Pacific Airport Group, the largest operator, by passenger volumes, of airports in Mexico, posted a fiscal result for the third quarter of 2022 above analyst consensus.

Revenue for Q3 came in at $335.51 million USD vs a street expectation of $320.98 million. Earnings per ADR were reported at $2.61 US vs average street estimates of $2.25 US per share and a high estimate of $2.33 US per share. EBITDA of $202.98 million US for the quarter was a 60.5% margin vs a 59.3% EBITDA margin year over year.

Reported traffic to Tijuana, Puerto Vallarta and Guadalajara, Mexico was very strong and nicely accretive traffic flows were reported at the Kingson and Montego Bay airports in Jamaica.

PAC took on the operatorship of the Kingston, Jamaica airport several years back. Initially, the concession was viewed as a way to curry favor with the Jamaican government, rather than as a potentially profitable venture in itself: an absurdly high crime rate in Kingston results in government officials and NGO staff routinely opting to use Montego Bay over Kingston. As a result, the Kingston facility was in horrid shape. However, a steady effort by PAC to renovate and upgrade the premise is resulting in an above average traffic flow. In Q3, traffic at Montego Bay and Kingston were up 83% and 99% year over year, respectively. Kingston, once estimated to be a break-even proposal at best, now offers the potential to prove a decent money maker over time.

Los Cabos, MX traffic growth was soft.

Total traffic through the Los Cabos airport was up by 32.6% in the first nine months of 2022 but was only up by 14.9% in the last fiscal quarter. My view is that the NASDAQ heavy, tech and knowledge-based sets of employees, primarily employed in California coastal cities, are a little less capable of paying up for air travel. More are also probably being requested to come into work, rather than telecommuting from their Los Cabos villas. It is most certainly an inconvenience, having to punch a clock, but on the whole, an almost 15% increase in travel, to what many Californians consider to be their second home, is still positive, considering the year-to-date pain that has been wrought upon their stock option packages.

Even a modest increase in international travel to Los Cabos, after factoring in the net worth reductions on those in the tech and knowledge sectors, supports my view that travel expenditures are really a category unto itself and should not necessarily be lumped into other forms of discretionary spending.

The easy year over year comps will soon come to an end.

In the quarters to come, traffic growth will normalize as airport operators stop comparing the 2022 results to pre-pandemic numbers posted in 2019. This might be considered a bit of a double-edged sword by some; I am unperturbed about evaluating any business using 2022 figures as a base for 2023 estimations. In order to get on with things, we must put pandemic figures where they belong, in the past.

The Mexican Peso has been a standout currency globally in reference to the US dollar.

Most international businesses, when converting their earnings to US dollars, are presently being savaged by their local currency weakness against the USD. Mexican companies are bucking this trend.


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