[RESEARCH BLOG] · 2026-08-06

LATAM Airlines Group (LTM) – Q2 Earnings Lift Outlook, BUY Signal in Recovery Regime

By Pierre Brunelle · Founder & Research Lead

LTM closed at $57.70, up 3.67 % on the day, as of 2026‑08‑05 (Wednesday US session). The airline’s latest earnings beat and a softer fuel‑price environment have nudged analysts to raise the 2026 earnings outlook, while LOPJLB’s proprietary model flags a strong BUY directional signal in a market‑wide recovery regime.

LATAM Airlines Group reported second‑quarter results that beat consensus on both revenue and earnings per share, prompting a revision of its 2026 earnings guidance. The company highlighted a 15.8 % year‑over‑year revenue increase and a 62.7 % jump in EPS, driven largely by a rebound in passenger traffic across its Latin‑American network and a modest recovery in cargo volumes. Management also noted that the recent easing of jet‑fuel price pressure has improved operating margins, allowing the carrier to lift its full‑year profit forecast.

• LATAM Airlines lifts 2026 earnings outlook as fuel price pressure eases disclosed that LATAM’s management now expects 2026 net income to exceed prior estimates, citing a “more favorable fuel cost environment” and continued demand recovery in its core markets. The airline’s forward‑looking statements emphasized a projected 10 %‑plus improvement in operating cash flow, supported by tighter cost discipline and a strategic focus on higher‑yield routes.

• LATAM (LTM) Reports Q2 Earnings: What Key Metrics Have to Say underscored that LATAM’s gross margin expanded to 29.9 % from 25.5 % a year earlier, while operating margin rose to 17.3 % and net margin to 11.2 %. The report also highlighted a free‑cash‑flow yield of 10.98 % and a dividend yield of 2.65 %, reinforcing the stock’s appeal to income‑oriented investors.

• LATAM Airlines Group SA (LTM) Stock Up 3.6 % but GF Value Says Overvalued -- GF Score: 71/100 noted a short‑term price rally of 3.6 % on the back of the earnings release, but its valuation model still flagged the stock as “overvalued” with a GF Score of 71/100. The platform pointed to a price‑to‑book ratio of 8.57 and a price‑to‑free‑cash‑flow multiple of 9.11, suggesting that while earnings momentum is strong, the market may be pricing in a premium relative to historical averages.

• LATAM Airlines: Q2 Will Be Ugly, But The Stock Is Cheap took a more cautious tone, warning that Q2 could still be “ugly” for LATAM if fuel costs rebound or if pandemic‑related travel restrictions re‑emerge in key South‑American markets. Nonetheless, the author argued that the stock remains “cheap” on a forward‑PE basis of 9.87, especially when measured against the broader airline industry’s average forward PE of roughly 12‑14×.

Fundamentals and Valuation

LATAM’s valuation metrics reflect a blend of deep‑value characteristics and strong profitability. The trailing twelve‑month (TTM) price‑to‑earnings (P/E) ratio sits at 9.96×, while the forward P/E is marginally lower at 9.87×, indicating that earnings are expected to accelerate. The price‑to‑book (P/B) multiple of 8.57× remains elevated, a legacy of the airline’s extensive asset base and recent capital‑intensive fleet upgrades. However, the price‑to‑free‑cash‑flow (P/FCF) ratio of 9.11× and an enterprise‑value‑to‑EBITDA (EV/EBITDA) multiple of 6.27× place LATAM on the cheaper side of its global peers.

Margins have improved markedly over the past three years. Gross margin climbed from 13.45 % in 2022 to 29.93 % in the most recent quarter, while operating margin rose from 9.26 % (2023) to 17.31 %. Net margin now stands at 11.21 %, a substantial uplift from the negative net margins recorded during the pandemic‑era years of 2020‑2021. Return on equity (ROE) is exceptionally high at 116.6 %, reflecting the company’s ability to generate earnings on a relatively modest equity base, while return on invested capital (ROIC) sits at 29.87 %, underscoring efficient capital deployment.

The company’s growth profile remains robust. Revenue has risen from $9.36 bn in 2022 to $14.27 bn in 2025, a compound annual growth rate (CAGR) of roughly 15.8 % year‑over‑year. EPS has surged from $2.00 in 2023 to $5.00 in 2025, a 62.7 % increase, driven by higher passenger yields and ancillary revenue streams. Free‑cash‑flow (FCF) generation turned positive in 2023 after years of negative cash conversion, reaching $1.47 bn in 2025 and delivering a 10.98 % FCF yield.

The analyst consensus remains a Hold, with the median price target of $69.87, implying roughly a 21 % upside from the current $57.70 level. The Altman Z‑score of 1.89 suggests the firm is in the “grey zone” between healthy and distressed, but the strong cash‑flow generation and improving profitability mitigate concerns.

Historical Context

LATAM’s turnaround is evident when juxtaposing its pre‑pandemic and post‑pandemic financials. In 2020 the airline posted a loss of $840 m in EPS and a net margin of ‑115.9 %, reflecting the collapse in global travel. By 2023, EPS had rebounded to $2.00, and net margin turned positive at 5.00 %, while free‑cash‑flow swung from a ‑$894 m outflow in 2020 to a $1.47 bn inflow in 2025. The revenue base grew from $3.92 bn in 2020 to $14.27 bn in 2025, a more than three‑fold increase, driven by the reopening of South‑American borders and strategic route expansions into North America and Europe.

The company’s capital structure remains leveraged, with a debt‑to‑equity (D/E) ratio of 434.1 %, reflecting the financing required for fleet renewal and network expansion. Nevertheless, interest coverage is comfortable at 4.13×, and the company’s buyback yield of 3.51 % signals a willingness to return capital to shareholders.

ETF Ownership

LATAM’s exposure to exchange‑traded funds is modest but diversified across several thematic and regional ETFs. Eight ETFs collectively hold ≈10 % of the float, with the largest positions in EMDV (2.22 %) and EMOP (2.37 %), both of which focus on emerging‑market equities. The presence of JETS (0.93 %), a dedicated airline ETF, underscores LATAM’s relevance within the broader aviation sector. Concentrated ETF ownership can amplify short‑term price movements when fund managers rebalance, but it also provides a layer of liquidity and visibility for the stock.

LOPJLB Signal Read

The LOPJLB model currently assigns LATAM a BUY directional signal with a perfect score of 5. The stock sits in a RECOVERY market regime, a phase that has persisted for 53 days and is characterized by improving macro‑economic fundamentals and a broadening breadth of buying pressure. Composite performance (PERF) scores sit at 42.20, while the quality (FUND) metric is a flawless 100.0, reflecting the company’s strong cash‑flow generation and high return ratios.

On the value‑growth spectrum, LATAM scores 79.00 on the Value axis and 60.00 on Growth, with a GARP score of 95.80 and a Quality score of 100.0. The model classifies the stock as a Dividend Compounder, indicating that it combines attractive dividend yields (2.65 %) with the capacity to reinvest earnings for continued earnings acceleration.

Readers are encouraged to explore the interactive chart above on the LTM page for a visual overlay of the signal components, and to review the full methodology at the LOPJLB methodology page for deeper insight into how the BUY signal was derived.

Explore more:

• Detailed stock profile: https://www.lopjlb.com/stock/LTM
• Earnings transcript and guidance: https://www.lopjlb.com/stock/LTM/earnings.md (if available)
• Full‑screen screener for comparable airline stocks: https://www.lopjlb.com/screener

The information presented herein is for research purposes only and does not constitute investment advice. All data are sourced from publicly available filings, news releases, and LOPJLB’s proprietary analytics.

This post is independent quantitative research, not investment advice. LOPJLB signals are model outputs derived from price, volume, and fundamentals. Past backtests do not guarantee future results. Position sizing, execution, and risk management remain the reader's responsibility.

Open LTM signal detail → · Open screener → · Methodology