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TAM S.A. (NYSE:TAM) will report its third-quarter 2011 earnings on Thursday, November 10, 2011.

The current Zacks Consensus Estimate for earnings per share (EPS) is 40 cents, representing an annualized loss of 62.96%.

With respect to earnings surprises over the trailing four quarters, TAM outperformed the Zacks Consensus Estimate in three quarters and was in line in one. Average earnings surprise was 88.46%, implying that the company outperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Second Quarter Highlights

On August 9, TAM reported its financial results for the second quarter of fiscal year 2011. TAM reported a net income of R$60.3 million (US$37.9 million) in the quarter, up from a loss of R$174.8 million (US$98.2 million) in the year-ago quarter, but down 53.2% sequentially.

Earnings entered positive territory with R$0.40 per share (US$0.25 per ADR) compared with a loss of R$1.2 per share (US$0.67 per ADR) reported in the year-ago quarter. Earnings were well ahead of the Zacks Consensus Estimate of $0.07 per ADR.

In the second quarter, net revenue was R$3,053.2 million (US$1,920.3 million), up 16.9% year over year and 0.4% sequentially. The year-over-year improvement was primarily due to higher load factor in the domestic and international markets as well as rising passenger demand in the quarter.

Agreement of Estimate Revisions

In the last 30 days, no analyst increased or decreased the company’s earnings per share (EPS) estimates for the third quarter, as there was no catalyst for such change. For fiscal 2011, no analyst increased or decreased his estimate. However, for fiscal 2012, one analyst increased estimates, while none decreased the same.

Magnitude of Estimate Revisions

Estimates over the last 30 days remained intact at 40 cents per share for the third quarter of 2011. The estimate represents a year-over-year decline of 62.96%.

Estimate for fiscal 2011 dropped from $1.03 to 31 cents over the last 30 days while that for fiscal 2012 showed an upward trend moving up from 95 cents to $1.32. These estimates represented a year-over-year decline of 86.92% for 2011 while a growth of 319.11% for 2012.

Our Take

TAM S.A is likely to post decent results in the third quarter based on fleet development, renovation programs along with restructuring old operations; in order to fulfill the growing needs of customers and cater to their escalating demand. Moreover, the recent approval of the proposed LATAM, is expected to increase flights, destinations, thereby raising the company’s market share and profitability.

The Company

TAM S.A., operating through its subsidiaries, TAM Linhas Aéreas and TAM Mercosur, is a renowned air transportation service provider, operating in the domestic and international markets. TAM competes directly with its peers, such as AMR Corporation (AMR) and GOL Linhas A (NYSE:GOL).

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