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Why Is Copa Holdings (CPA) Up 4.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Copa Holdings (CPA - Free Report) . Shares have added about 4.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Copa Holdings due for a pullback? 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 Incurs Wider Than Expected Loss in Q3

Copa Holdings incurred a loss (excluding 8 cents from non-recurring items) of $2.86 per share in third-quarter 2020, wider than the Zacks Consensus Estimate of a loss of $2.79. In the year-ago quarter, the company reported earnings of $2.45 per share.

Thanks to coronavirus-led government travel restrictions, the company could not operate scheduled commercial flights during the first 45 days of the third-quarter. From Aug 14, the airline resumed limited scheduled commercial operations due to Panama's restrictions on the number of flights and entry for non-citizens and non-residents. Since then, it has been gradually increasing capacity.

Quarterly revenues of $32.4 million missed the Zacks Consensus Estimate of $39 million. Moreover, the top line plunged 95.4% year over year with passenger revenues (accounted for 85.2% of the top line) declining 96%.

Operational Statistics

On a consolidated basis, traffic (measured in revenue passenger miles or RPMs) fell 99% and capacity (measured in available seat miles/ASMs) declined 98.5%. Travel restrictions due to coronavirus concerns forced the company to reduce capacity drastically. As traffic decline was more than the amount of capacity contraction, load factor (% of seats filled with passengers) declined by 2600 basis points to 59.7% in the reported quarter.

Total operating expenses declined 75.8% year over year to $139.35 million, backed by lower capacity among other factors. Expenses on fuel fell 99.3% due to reduced fuel consumption (down 98.4% to 1.32 million) and low jet fuel prices ($1.41 per gallon, down 34.6%). Expenses on wages, salaries and other employee benefits fell 61% due to temporary work-contract suspensions, voluntary pay cuts and work-hour reductions for employees.

Other Details

Copa Holdings exited the third quarter with cash and cash equivalents of $222.26 million compared with $158.73 million at 2019 end. Total debt at the end of the third quarter was $1.2 billion. The company repaid $50 million in short-term lines of credit.

This company ended the third quarter with a consolidated fleet of 74 aircrafts – 68 Boeing 737-800s and 6 Boeing 737MAX9s. During the quarter, the company also completed the delivery of its first EMB-190 aircraft out of 14 that has been sold to a third party.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 6.69% due to these changes.

VGM Scores

Currently, Copa Holdings has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. 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 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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