Post-Election Uncertainty Impacts Mexican Airports
We believe volatility will persist over the next several months with three wide-moat Mexican airports that we cover.
Donald Trump winning the 2016 presidential election raised uncertainty surrounding the Mexican airports we cover. Wide moat-rated airports, Grupo Aeroportuario del Pacifico, (PAC) or GAP, Grupo Aeroportuario del Centro Norte, (OMAB) or OMA, and Grupo Aeroportuario del Sureste, (ASR) or ASUR, have suffered a sharp drop in their share prices following the U.S. election, and we believe volatility will persist over the next several months. Mexican airports have experienced substantial growth in passenger numbers and revenue over the last few years, but we believe the U.S. election has created risks to this trend.
Over the near term, uncertainty surrounding Trump’s immigration and trade policies, which could hurt both air travel and economic activity within Mexico and between the U.S. and Mexico, creates a sizable risk overhang for the Mexican airport operators. Over the longer term, any change in NAFTA and/or immigration policies could have a material impact on the operators' domestic and international passenger business. The election results also triggered a steep 13% depreciation in the Mexican peso relative to the U.S. dollar. Going into a Trump presidency, we think OMA is the weakest due to its reliance on domestic air travel, while ASUR and GAP are better positioned thanks to their significant exposure to international traffic, which could benefit from a permanently weaker peso. We plan to adjust our fair value estimates to account for the peso’s depreciation and revisit some of our growth estimates, particularly for domestic passengers, to account for the risk a Trump presidency now presents. Nonetheless, we maintain our wide moat ratings on all three companies and expect them to continue to attract healthy traffic flows due to their monopoly-like positions.
Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.
Chris Higgins does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.