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Let’s take a look into the factors responsible for the dismal price performance.
Copa Holdings, like other airline companies, has been hit hard by surge in oil prices. On a year-to-date basis, oil prices have increased roughly 15%.It is a well-documented fact that the health of airline stocks is inversely related to oil prices. This is because fuel costs represent one of the most significant expenses for carriers. Naturally, increase in oil prices results in significant rise in operating expenses of carriers, thus limiting bottom-line growth.
In 2018, Copa Holdings expects effective fuel price per gallon to be approximately $2.30, higher than $1.87 recorded in 2017. Fuel costs, apart from expenses on the labor front, are also expected to limit bottom-line growth.
Moreover, the currency headwind in Brazil and Argentina is a major hurdle for this Latin-American carrier. Primarily due to this currency-related headwind, the company lowered its 2018 outlook for operating margin. The metric is currently projected in the range of 14-16%, down from the previous expectation of 17-19%. Additionally, unit revenues are also expected to remain low in the current year.
The decline in August load factor (percentage of seats filled by passengers) due to capacity expansion outpacing traffic growth is concerning as well. We note that higher load factor is a positive for airlines as it is related to increased revenues and profitability with fixed costs being spread across more passengers.
Other Unfavorable Readings
The Zacks Consensus Estimate for third-quarter and full-year 2018 earnings moved south 25.3% and 12.5%, respectively, over the last 60 days. The unfavorable earnings estimate revisions are reflective of investors’ pessimism surrounding the stock.
Furthermore, the company’s Momentum Score of F highlights its short-term unattractiveness. Undoubtedly, the above negatives substantiate the company’s Zacks Rank #4 (Sell).
Shares of SkyWest, Trinity and Old Dominion have rallied more than 52%, 20% and 63%, respectively, in a year.
Best Electric Car Stock? You'll Never Guess It.
Zacks Research has released a report that may shock many investors. One stock stands out as the best way to invest in the surge to electric cars. And it's not the one you may think!
Much like petroleum 150 years ago, lithium battery power is set to shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, revenues that were already at $31 billion in 2016 are expected to blast to over $67 billion by the end of 2022.
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Copa Holdings (CPA) Stock Down 42% Year to Date: Here's Why
Shares of Copa Holdings, S.A. (CPA - Free Report) have plunged 41.9% so far this year compared with the Zacks Airline industry’s 14.3% decline.
Let’s take a look into the factors responsible for the dismal price performance.
Copa Holdings, like other airline companies, has been hit hard by surge in oil prices. On a year-to-date basis, oil prices have increased roughly 15%.It is a well-documented fact that the health of airline stocks is inversely related to oil prices. This is because fuel costs represent one of the most significant expenses for carriers. Naturally, increase in oil prices results in significant rise in operating expenses of carriers, thus limiting bottom-line growth.
In 2018, Copa Holdings expects effective fuel price per gallon to be approximately $2.30, higher than $1.87 recorded in 2017. Fuel costs, apart from expenses on the labor front, are also expected to limit bottom-line growth.
Moreover, the currency headwind in Brazil and Argentina is a major hurdle for this Latin-American carrier. Primarily due to this currency-related headwind, the company lowered its 2018 outlook for operating margin. The metric is currently projected in the range of 14-16%, down from the previous expectation of 17-19%. Additionally, unit revenues are also expected to remain low in the current year.
The decline in August load factor (percentage of seats filled by passengers) due to capacity expansion outpacing traffic growth is concerning as well. We note that higher load factor is a positive for airlines as it is related to increased revenues and profitability with fixed costs being spread across more passengers.
Other Unfavorable Readings
The Zacks Consensus Estimate for third-quarter and full-year 2018 earnings moved south 25.3% and 12.5%, respectively, over the last 60 days. The unfavorable earnings estimate revisions are reflective of investors’ pessimism surrounding the stock.
Furthermore, the company’s Momentum Score of F highlights its short-term unattractiveness. Undoubtedly, the above negatives substantiate the company’s Zacks Rank #4 (Sell).
Stocks to Consider
A few better-ranked stocks in the broader Transportation Sector are SkyWest, Inc. (SKYW - Free Report) , Trinity Industries, Inc. (TRN - Free Report) and Old Dominion Freight Line, Inc. (ODFL - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of SkyWest, Trinity and Old Dominion have rallied more than 52%, 20% and 63%, respectively, in a year.
Best Electric Car Stock? You'll Never Guess It.
Zacks Research has released a report that may shock many investors. One stock stands out as the best way to invest in the surge to electric cars. And it's not the one you may think!
Much like petroleum 150 years ago, lithium battery power is set to shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, revenues that were already at $31 billion in 2016 are expected to blast to over $67 billion by the end of 2022.
See Zacks Best EV Stock Free >>