Why Is Copa Holdings (CPA) Down 9% Since Last Earnings Report?
A month has gone by since the last earnings report for Copa Holdings (CPA). Shares have lost about 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 the most recent earnings report in order to get a better handle on the important drivers.
Copa Holdings Incurs Narrower Than Expected Loss in Q1
Copa Holdings incurred a loss (excluding 37 cents from non-recurring items) of $2.23 per share in the first quarter of 2021, narrower than the Zacks Consensus Estimate of a loss of $2.25. In the year-ago period, the company reported earnings of $1.75. Results were hurt by coronavirus-induced limited flight operations. The company’s flight operations were only 39% of the 2019 (pre-pandemic) level in the quarter.
Quarterly revenues of $185.7 million missed the Zacks Consensus Estimate of $188.9 million and also plunged 68.8% year over year, with passenger revenues (contributed 93.2% to the top line) declining 69.9%.
Operational Statistics
On a consolidated basis, traffic (measured in revenue passenger miles or RPMs) fell 61.6% and capacity (measured in available seat miles/ASMs) declined 54.8%. As traffic decline was more than the amount of capacity contraction, load factor (% of seats filled with passengers) contracted 12.3 percentage points to 69.2% in the reported quarter. Passenger revenue per available seat miles decreased 33.3% year over year to 7 cents. Additionally, total revenue per available seat mile slipped 31% to 7.5 cents. Cost per available seat mile jumped 17.1% year over year. Excluding fuel, the metric surged 30.1%.
Total operating expenses declined 47.1% year over year to $262.76 million, backed by lower passenger servicing and fuel cost. Expenses on fuel fell 62.5% due to reduced fuel consumption (down 58.5% year over year to 29.08 million) and low jet fuel prices ($1.75, down 9.9%). Expenses on passenger servicing declined 74.5% on a year-over-year basis. Moreover, expenses on wages, salaries and other employee benefits dropped 50.5% due to reduced payroll expenses, voluntary temporary leaves and less variable compensation provisions.
Other Details
Copa Holdings exited the first quarter with cash and cash equivalents of $193.8 million compared with $119.10 million at the end of 2020. Total debt, including lease liabilities, was $1.7 billion at the end of the first quarter.
This company ended the first quarter with a consolidated fleet of 81 aircraft — 68 Boeing 737-800s and 13 Boeing 737 MAX 9s. During the quarter, the company took delivery of 6 Boeing 737 MAX 9. Additionally, the company sold 4 Embraer 190 aircraft to a third party as was previously agreed upon.
Q2 Outlook
Copa Holdings expects its capacity to reach approximately 2.9 billion in the second quarter. This represents around 45% of second-quarter 2019 levels. The company anticipates total revenues of $260 million in the quarter, which is 40% of second-quarter 2019 revenues. Cash consumption, excluding proceeds from asset sales and extraordinary financing activities, is estimated between $10 million and $15 million per month in the period.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 17.15% due to these changes.
VGM Scores
Currently, Copa Holdings has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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