Departure board at Puerto Vallarta airport. Image source:

Grupo Aeroportuario Del Pacífico S.A.B. de C.V. (NYSE:PAC) posted impressive numbers in its third-quarter 2015 earnings report, released on Oct. 22. The operator of Mexican airports continued to benefit from its purchase in April of airport operator Desarrollo de Concesiones Aeroportuarias, S.L. (DCA). The purchase gave "GAP," as Grupo Aeoroportuario refers to itself, nearly three-quarters ownership of Sangster International Airport, located in Montego Bay, Jamaica.

GAP: The raw numbers

 Q3 2015 ActualQ3 2014 ActualGrowth (YOY)
Revenue 2,159,305 1,369,297 57.7%
Operating Income 1,178,014 652,783 80.5%
Net Income Attributable to Controlling Interest 897,666 534,206 68%

Data source: Company SEC filing Oct. 22, 2015. All figures in thousands of Mexican pesos. At an exchange rate of 17.09 pesos per U.S. dollar at Sept. 30, 2015, Q3 2015 revenue, operating income, and net income convert to $126.3 million, $68.9 million, and $52.5 million, respectively.

 What happened with GAP this quarter?

  • Significant growth in revenue and profits was attributable the consolidation of Montego Bay airport into company financials. This was GAP's first full quarter operating the airport.
  • Rising passenger traffic at GAP's Mexican airports also contributed to results. The company's two largest airports, Guadalajara and Tijuana, enjoyed traffic increases of 14.4% and 16%, respectively. Overall, traffic at Mexican airports jumped 14.1% during the quarter. Conversely, Montego Bay traffic expanded only 2.3% versus the prior year. 
  • Aeronautical services revenue increased over 45%, primarily due to the addition of Montego Bay. However, aeronautical services enjoyed crisp improvement at Mexican airports, rising 21% due both to the increased traffic mentioned above, and higher per-passenger charges.
  • A similar phenomenon was seen in the company's non-aeronautical services revenue. An overall leap of nearly 54% can be traced primarily to Montego Bay. Yet the overall surge in passenger traffic meant that more travelers bought into the food and beverage, car rental, retail (including duty-free shops) and other services provided at GAP's airports. Mexican non-aeronautical revenue scaled up 26% during the quarter.
  • Net income might have been even higher but for an outsized loss the company recognized on a foreign exchange event. In connection with its acquisition of DCA earlier this year, GAP borrowed $191.0 million denominated in U.S. dollars. Due to the strength of the greenback, the company incurred a Q3 foreign exchange loss on the debt of 275.4 million Mexican pesos, or about $16.1 million. This equals roughly a third of GAP's reported profit during the quarter.

Looking forward
GAP issued a brief outlook statement on Oct. 22 in conjunction with its earnings release. The document forecasts full-year 2015 revenue growth of 42%, along with EBITDA growth of 43% (the company did not provide net income guidance). Both of these figures imply some slow down in the fourth quarter, as during the first nine months of 2015, revenue has grown at a 50% pace and EBITDA has increased 47.2%. 

Perhaps the softer anticipated fourth quarter catalyzed a decline in GAP shares of nearly 6% after earnings were released. Shareholders didn't need much of an impetus to take some profits -- the "PAC" ticker is having a splendid year so far. Even after the sell-off, investors have enjoyed a nearly 39% gain year to date. GAP's foray into a non-Mexican airport in 2015 has helped diversify its business model, and given the company a template for future revenue expansion.