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Why Is Copa Holdings (CPA) Down 5.7% Since Last Earnings Report?

Zacks Equity Research
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A month has gone by since the last earnings report for Copa Holdings (CPA). Shares have lost about 5.7% 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 catalysts.

Copa Holdings Q1 Earnings Beat Estimates, Down Y/Y

Copa Holdings' earnings of $2.11 per share beat the Zacks Consensus Estimate of $1.64. However, the bottom line declined 34.5% year over year. Downturn in some Latin American economies and lower revenues affected results.

Quarterly revenues declined nearly 6% year over year to $672.2 million and also marginally missed the Zacks Consensus Estimate of $672.3 million. This downside was due to a 6.6% decrease in passenger revenues.

Operational Statistics

While passenger unit revenue per available seat mile (PRASM) fell 8.4%, yield per passenger mile was down 8.8%. On a consolidated basis, traffic (measured in revenue passenger miles or RPMs) rose 2.3% and capacity (or available seat miles/ASMs) inched up 1.9% in the reported quarter. As traffic growth outpaced capacity expansion, consolidated load factor improved 40 basis points (bps) to 83.3%.

Additionally, unit revenue per available seat mile (RASM) deteriorated 7.7%. Adjusted operating cost per available seat mile (CASM) decreased 3.2% in the reported quarter owing to better cost management. The metric excluding fuel costs dipped 2.9%. With oil prices at modest levels during the first quarter, average fuel price per gallon decreased 3.5% year over year to $2.09.

Liquidity

The company exited the first quarter with cash and cash equivalents of $212.27 million compared with $156.16 million at the end of 2018. Long-term debt amounted to $1.04 billion compared with $975.28 million at the end of last December.

Dividend Update

The company’s board has cleared a quarterly cash dividend of 65 cents per share, payable Jun 14, 2019 to shareholders of record as of May 31.

2019 Outlook

For the full year, Copa Holdings anticipates capacity to increase approximately 1%. Additionally, operating margin is projected in the 12-14% range year over year compared with 13% achieved in 2018. Effective price per gallon of jet fuel is estimated at $2.25 in the current year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -8.72% due to these changes.

VGM Scores

At this time, Copa Holdings has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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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