Will Grupo Aeroportuario del Sureste (ADR) Fly Higher This Quarter?

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Grupo Aeroportuario del Sureste (ADR) , or ASUR, is expected to report third quarter results on Oct. 20. Wall Street analysts estimate that the operator of the Cancun airport will report earnings of $1.41 per share. That would be a nice boost from last year's third quarter when the company earned $1.29 per share. Here are a few things to watch that could lead to the company's profits to fly even higher this quarter.

Traffic is flying higher
Each month this quarter ASUR announced that traffic at its airports had increased over last year's traffic. In July traffic was up 6.5%, August traffic was up 10.6% and September traffic was up 10.5%. Not only that but the company saw very strong traffic growth at its crown jewel Cancun airport, especially from international passengers. International passenger traffic at Cancun was up 11.5% in July, 9.8% in August, and 7.7% in September.

Higher traffic typically contributes to higher revenue and profits, so this is a good sign for the upcoming quarter. Last quarter the company noted that total passenger traffic was up 10.65%, which yielded a 4.46% increase in total revenue and a 8.51% increase in operating profit. While net income and earnings per share did fall over the prior year, that quarter benefited from the Mexican tax amnesty program.

Higher traffic drives commercial revenue
One area to watch closely is commercial revenue. Commercial revenue at ASUR is derived from duty-free stores, car rentals, retail operations, banking and currency exchange services, advertising, teleservices, nonpermanent ground transportation, food and beverage and parking lot fees. Last quarter, commercial revenue was 9.07% higher than the previous year's second quarter as the 10.65% increase in traffic drove this revenue increase. Nearly all of its revenue sources enjoyed strong increases with banking and currency exchange services as well as ground transportation revenue delivering the strongest growth as both were up more than 20%. The only weak spot was duty-free revenue, which declined by 1.24% year over year.

Given the strong traffic growth this quarter, particularly at Cancun, we're likely to see another strong year-over-year gain in commercial revenue. However, one area to keep an eye on is the total commercial revenue per passenger, which actually dipped last quarter to Ps.73.03 or by 1.42% over the second quarter of 2012. What we're looking for this time is a gain from the Ps.71.25 per passenger ASUR pulled in during the third quarter of 2013. That was up 5.06% over the prior year and ideally investors would like to see the company not only increase its overall commercial revenue, but also increase its commercial revenue per person so that it's leveraging its traffic gains into even more revenue.

Investor takeaway
ASUR appears to be on pace to deliver another solid quarter when it reports earnings on Oct. 20. We already know that the company's traffic is a lot higher than last year's third quarter. What investors hope is that the company can turn this higher traffic into higher commercial revenue, especially on a per passenger basis. If it can do that, then the company's earnings have the potential to soar past analysts' estimates.

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The article Will Grupo Aeroportuario del Sureste (ADR) Fly Higher This Quarter? originally appeared on Fool.com.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Grupo Aeroportuario del Sureste (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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