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Copa Holdings (CPA) Incurs Loss in Q2, Revenues Drop 98% Y/Y

Zacks Equity Research

Copa Holdings CPA incurred a loss (excluding $6.38 from non-recurring items) of $2.7 per share in second-quarter 2020, narrower than the Zacks Consensus Estimate of a loss of $3.38. In the year-ago quarter, the company reported earnings of $1.2 per share.

Thanks to coronavirus-led travel restrictions, the company could not operate scheduled commercial flights during the second quarter. Instead it operated a small number of charter and humanitarian flights, representing less than 1% of second-quarter 2019’s capacity. Due to this limited flying, Copa Holdings did not provide certain financial ratios, unit metrics and operational indicators this time, since they were either not measurable or applicable in such a scenario.

Quarterly revenues of $14.5 million beat the Zacks Consensus Estimate of $14.4 million. However, the top line plunged 97.7% year over year with passenger revenues (accounted for 74.2% of the top line) declining 98.3%.

Operational Statistics

On a consolidated basis, traffic (measured in revenue passenger miles or RPMs) dropped 99.7% and capacity (or available seat miles/ASMs) declined 99.5%. Travel restrictions due to coronavirus concerns forced the company to reduce capacity dramatically. As traffic decline was more than the amount of capacity contraction, load factor (% of seats filled with passengers) decreased in the reported quarter.

Total operating expenses declined 33.8% year over year to $372.41 million, backed by lower capacity among other factors. Expenses on fuel fell 99.9% due to reduced fuel consumption and low jet fuel prices. Expenses on wages, salaries and other employee benefits decreased 64.7% due to temporary work-contract suspensions, voluntary pay cuts and work-hour reductions for employees.

Copa Holdings, S.A. Price, Consensus and EPS Surprise

Copa Holdings, S.A. Price, Consensus and EPS Surprise
Copa Holdings, S.A. Price, Consensus and EPS Surprise

Copa Holdings, S.A. price-consensus-eps-surprise-chart | Copa Holdings, S.A. Quote

Other Details

Copa Holdings exited the second quarter with cash and cash equivalents of $307.3 million compared with $158.73 million at 2019 end. Total debt at the end of the second quarter was $1.3 billion. The company repaid $95 million in short-term lines of credit.

This Zacks Rank #4 (Sell) company ended the second quarter with a consolidated fleet of 102 aircraft – 6 Boeing 737MAX9s, 68 Boeing 737-800s, 14 Boeing 737-700s, and 14 Embraer-190s.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outlook

Due to rising coronavirus cases, the Panamanian government has extended air-travel restrictions through Aug 21, 2020. Hence the company now expects to resume operations (on a scaled-down basis) from Sep 4, 2020. During the first-quarter earnings release, management stated that the company is expected to restart commercial operations from Jun 1.

With the initial start of operations, the carrier’s capacity is estimated to be less than 10% of its 2019 level. This could gradually increase to up to 30-40% by the end of this year.

Based on these assumptions, the airline anticipates monthly cash burn to be approximately $66 million for the remainder of 2020.

Performance of Other Airline Stocks

Delta Air Lines DAL incurred a loss (excluding $4.58 from non-recurring items) of $4.43 per share in the June quarter, wider than the Zacks Consensus Estimate of a loss of $3.97. Total revenues in the quarter came in at $1,468 million, surpassing the Zacks Consensus Estimate of $1,400.8 million.

Southwest Airlines Co. LUV incurred a loss of $2.67 per share (excluding $1.04 from non-recurring items) in the second quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $2.53. Meanwhile, operating revenues of $1,008 million beat the Zacks Consensus Estimate of $868.9 million.

Alaska Air Group ALK incurred a loss of $3.54 per share (excluding $1.81 from non-recurring items) in the second quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $3.39. Revenues came in at $421 million, surpassing the Zacks Consensus Estimate of $307.7 million.

Each of the stocks mentioned above carry the same Zacks Rank as Copa Holdings.

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