Investors are waiting to see whether Mexican airport operator Grupo Aeroportuario del Pacifico (NYSE:PAC) will take flight when it reports first-quarter results on Tuesday, April 24, or whether it will be a hard landing.

What analysts say:

  • Buy, sell, or waffle? Of the six analysts covering the Motley Fool Hidden Gems recommendation, three say buy and three have it waiting to taxi with a hold.
  • Revenues. Revenues are expected to increase by 15% from last year, to $74 million.
  • Earnings. Profits are expected to rise more than 11%, to $0.57 per share.

What management says:
Grupo Aeroportuario del Pacifico, or GAP, generates revenue in two ways. The airlines charge fees to the passenger and then turn them over to the airport operator. Also, non-aeronautical income is earned from parking, retail shops, and concession stands. The strength of rising domestic Mexican air travel has helped GAP prosper in a time where international travel seems to be declining. Despite the devastating hurricanes from 2005, GAP has managed to increase earnings from its operations in Mexico's popular central and western destinations.

What management does:
Grupo Aeroportuario del Pacifico -- like competitors Grupo Aeroportuario del Sureste (NYSE:ASR), which operates airports in southern Mexico, and Grupo Aeroportuario del Centro Norte (NASDAQ:OMAB), the central and northern Mexico airport operator -- doesn't actually own the airports. The Mexican government does. While that means that certain costs are kept in check (such as capital expenditures), the fees that it imposes on the airlines, which account for 80% of its revenues, are regulated by the government.

Typically, GAP imposes the maximum fees permissible, but at times has faced airlines that have balked at paying them because of their own precarious financial situation. The government recently raised the limit on what GAP can charge, but the company is unsure whether it will pass that along to the airlines. For example, just last month GAP announced that Lineas Aereas Azteca, which operates at seven of GAP's 12 airports, had suspended operations because of a worsening financial condition and concerns of "basic security standards." Other airlines in Mexico are also financially strapped.

























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Mexico continues to be a vacation hot spot among Americans seeking a bargain getaway. Although international air travel will always be an important component of the airline industry in Mexico, it is in domestic air travel that the operators will make or break their business. With Grupo Aeroportuaria del Sureste servicing popular destinations for Mexicans, such as Los Cabos and Puerto Vallarta, GAP should continue to experience growth in passenger traffic.

Looking south of the border to the growing opportunities in Mexico should give a lift to investors.

For related Foolishness:

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.