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Growth & Income

Copa Holdings SA (CPA - Snapshot Report) has enjoyed positive earnings estimate revisions over the last couple of months after reporting strong third-quarter results, which included a positive surprise of almost 5%. Furthermore, this provider of airline passenger and cargo services currently offers a dividend yield of 2.28%. With a long-term expected earnings growth rate of 19.6%, this Zacks #2 Rank (Buy) has solid opportunities, backed by expansion plans, optimization of route networks and advanced technological applications.

A Bright Third Quarter

On November 7, Copa Holdings posted impressive third-quarter 2012 results, including earnings per share of $2.20 that surpassed the Zacks Consensus Estimate of $2.10 by 4.8%. The result also shot up 8.4% year over year. Total revenue was $590.4 million, exceeding the Zacks Consensus Estimate of $573.0 million and improving from last year by 24.5%. The performance was buoyed by a 23.8% rise in passenger traffic and a 26.6% advance in capacity expansion.

Earnings Estimates

For 2012, the Zacks Consensus Estimate of $7.86 implies a year-over-year increase of 11.3%. For 2013, the Zacks Consensus Estimate has advanced 1.2% in 60 days to $9.19, implying year-over-year growth of 17.0%.

Dividend Yield

In late November, the board of directors of Copa Holdings announced a dividend payout of $2.25 per share (reflecting almost 30% of the estimated annual consolidated net income for 2012). The dividend was raised by 7.1% from the prior level. Currently, the company offers a lucrative dividend yield of 2.28%, significantly higher than the industry average of 0.6% and the company’s 5-year average yield of 1.50%.

Attractive Valuation

Copa Holdings currently trades at a forward P/E multiple of 12.6, which is almost in line with that of the peer group average of 12.3. Also, the stock’s trailing 12-month ROE of 22.7% is substantially higher than the peer group average of 16.5%. The PEG ratio comes in at 0.64, a 36% discount to the benchmark of 1 for a fairly priced stock.

Chart

The chart below displays an upward price movement since September this year. The stock has been consistently trading above its 50 and 200-day moving averages. The widening gap between the stock price line and that of 50 and 200-day moving averages show the growth potential of Copa Holdings.

Panama-based Copa Holdings has been running operations over the last 65 years in 63 destinations on 29 countries, spreading across North, Central and South America, and the Caribbean. The company – with a market capitalization of $4.36 billion – provides passenger and cargo services through two major operating subsidiaries – Copa Airlines and Copa Airlines Colombia. Currently, the company operates a consolidated fleet of 82 aircraft. Management aims to expand the company’s horizon by bringing in more flights and destinations in the coming months.


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