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Will Rise in Air Travel Aid Copa Holdings (CPA) Q1 Earnings?

Zacks Equity Research
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Copa Holdings, S.A. CPA is slated to release first-quarter 2018 results on May 9, after the closing bell.

In the fourth quarter of 2017, the company delivered a positive earnings surprise of 1.3%. Moreover, the company has an impressive earnings history, having surpassed the Zacks Consensus Estimate in each of the past four quarters with an average beat of 5.5%.

Things are looking up for the company in the last completed quarter too. The same is also well-reflected in the upward estimate revisions. The stock has seen the Zacks Consensus Estimate for first-quarter earnings being revised 2.2% upward over the last 90 days.

Why a Likely Positive Surprise?

Our proven model shows that Copa Holdings is likely to beat on earnings this reporting cycle on the back of a perfect combination of the following two key ingredients:

Zacks ESP: Copa Holdings has an Earnings ESP of +0.78% as the Most Accurate estimate is pegged at $2.80 per share, higher than the Zacks Consensus Estimate of $2.78. A positive Zacks ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Copa Holdings carries a Zacks Rank #3 (Hold), which further increases the predictive power of ESP. Note that stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have significantly higher chances of beating estimates.
 
Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Copa Holdings, S.A. Price and EPS Surprise

 

Copa Holdings, S.A. Price and EPS Surprise | Copa Holdings, S.A. Quote


What is Driving This Better-Than-Expected Earnings?

The aviation market in Latin America has flourished lately on the back of increase in travel and tourism in the region. This strong demand for air travel is likely to boost passenger revenues in the first quarter, aiding the company’s top line in process. The consensus estimate for first-quarter passenger revenues stands at $683 million, higher than $601 million a year ago.

Additionally, the Zacks Consensus Estimate for passenger unit revenues in the quarter to be reported is pegged at 11 cents, slightly above 10 cents in the year-ago quarter.

Moreover, the rising load factor in each month from January to March is anticipated to drive revenues and profitability for the company. Notably, the load factor rose 40 basis points (bps) in January and 210 bps, respectively, in February and March.

The improvement in load factor also indicates efficient capacity utilization and higher profitability, with fixed costs being divided among more passengers. The Zacks Consensus Estimate for first-quarter load factor is pegged at 83%, more than 82% reported a year ago.

However, increased fuel costs might limit bottom-line growth this earnings season. The consensus mark for fuel costs in the soon-to-be-reported quarter stands at $2.17, much higher than $1.80 in the year-ago quarter.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider the following stocks as these too comprise the right combination of elements to deliver an earnings beat in the upcoming releases:

Expeditors International of Washington, Inc. EXPD has an Earnings ESP of +2.09% and a Zacks Rank #2. The company will report first-quarter earnings on May 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

LATAM Airlines Group S.A. LTM has an Earnings ESP of +19.23% and is a Zacks #3 Ranked player. The company will announce first-quarter results on May 8.

Air Lease Corporation AL has an Earnings ESP of +0.30% and a Zacks Rank of 3. The company will announce first-quarter earnings on May 10.

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