Copa Misses Estimates

Zacks

Copa Holdings S.A. (CPA)’s fourth quarter earnings and sales missed the Zacks Consensus estimates, though the results grew on a year over year basis.

The Panama based airline passenger and cargo services company’s adjusted earnings per share for the fourth quarter grew 4.1% over the prior year quarter to $2.00. However, earnings fell short of the Zacks Consensus Estimate of $2.23 by 9.9%.

Adjusted earnings exclude special items like fuel hedging instruments. Including these special items, EPS was $1.95, a decrease of 17.4% year over year.

Revenue: In the reported quarter, sales increased 17.7% to $599.8 million, against $509.4 million reported a year ago. This was a result of increased passenger traffic in the quarter of 23.7%, largely driven by international traffic growth of 26.0%. Also, the quarter saw a 22.3% increase in capacity including international capacity growth of 24.4%. However, revenue fell short of the Zacks Consensus Estimate of $605.0 million.

Costs/Margins: Operating expenses for the quarter escalated 24.5% to $495.6 million, compared with the year-ago quarter. Operating income dropped 6.5% to $104.3 million, due to an increase in fuel charges coupled with a decline in operating revenue per available seat mile.

Balance Sheet: Exiting the fourth quarter, the company had cash and cash equivalents of $651.1 million, a decline of 10.1% sequentially. Long-term debt of the company was up 0.2% sequentially to $1.1 billion.

At the end of the quarter, Copa had a fleet of 83 aircraft, which consists of Boeing S.A. (BA)’s 57 aircraft and Embraer S.A. (ERJ)’s 26. However, subsequent to the quarter, the company entered into a sale and lease back agreement of four aircraft with MC Aviation Partners, a subsidiary of Mitsubishi Corporation (MSBHY), which is scheduled for delivery in 2013. Also, a similar contract was entered into with SMBC Aviation Capital for four aircraft to be delivered in 2014.

The stock currently holds a Zacks Rank #3 (Hold).

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