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Copa Holdings (CPA) Down 10.9% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
Business First Bancshares, Inc. (BFST) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

A month has gone by since the last earnings report for Copa Holdings (CPA). Shares have lost about 10.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Copa Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Copa Holdings Q4 Earnings Miss Estimates, Down Y/Y

The company’s earnings (excluding $4.71 from non-recurring items) of $1.04 per share missed the Zacks Consensus Estimate of $1.06. Moreover, the bottom line plunged significantly on a year-over-year basis primarily due to high fuel costs.

Quarterly revenues slipped nearly 3% year over year to $656.1 million and lagged the Zacks Consensus Estimate of $673.6 million. Passenger revenues declined 3.2% year over year to $631.8 million.

Operational Statistics

While passenger unit revenue per available seat mile (PRASM) declined 8.2%, yield per passenger mile dipped 7.7%. On a consolidated basis, traffic (measured in revenue passenger miles or RPMs) rose 4.9% and capacity (or available seat miles/ASMs) was up 5.5% in the reported quarter. As traffic growth was outpaced by capacity expansion, consolidated load factor contracted 40 basis points (bps) to 82.8%.

Additionally, unit revenue per available seat mile (RASM) slid 7.7%. Adjusted operating cost per available seat mile (CASM) inched up 0.5% in the reported quarter, primarily due to high costs. The metric excluding fuel costs declined 5.8%. Cost-cutting efforts among other factors led to this improvement. Despite the current downtrend in oil prices, average fuel price per gallon increased 17.5% year over year to $2.38.

Liquidity

The company exited 2018 with cash and cash equivalents of $153.3 million compared with $238.8 million at the end of 2017. Long-term debt amounted to $979.9 million compared with $876.1 million in December 2017.

Lowered Dividend

Adding to the woes, the board of directors decided to trim quarterly dividend by 25.3%. The new dividend is 65 cents per share (annualized $2.60). The first instalment of the dividend will be paid on Mar 15 to shareholders of record as on Feb 28, 2019.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -21.13% due to these changes.

VGM Scores

Currently, Copa Holdings has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Copa Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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