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Why Is Copa Holdings (CPA) Up 18.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Copa Holdings (CPA - Free Report) . Shares have added about 18.9% 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 drivers.

Copa Holdings Incurs Wider Than Expected Loss in Q4

Copa Holdings incurred a loss (excluding $1.97 from non-recurring items) of $2.00 per share in fourth-quarter 2020, wider than the Zacks Consensus Estimate of a loss of $1.90. In the year-ago quarter, the company reported earnings of $2.17 per share.

Owing to COVID-19 effect on the aviation industry, the company on average operated at approximately 27% of the capacity for the same period in 2019. Due to this limited flying, Copa Holdings did not provide certain financial ratios, unit metrics and operational indicators this time, since they were either not measurable or applicable in such a scenario.

Quarterly revenues of $158.6 million beat the Zacks Consensus Estimate of $153.4 million. However, the top line plunged 76.7% year over year with passenger revenues (contributed 93% to the top line) declining 77.6%.

Operational Statistics

On a consolidated basis, traffic (measured in revenue passenger miles or RPMs) fell 75.8% and capacity (measured in available seat miles/ASMs) declined 72.6%. As traffic decline was more than the amount of capacity contraction, load factor (% of seats filled with passengers) declined 10 percentage points to 75.3% in the reported quarter.

Total operating expenses declined 61.8% year over year to $253.7 million, backed by lower passenger servicing and fuel cost. Expenses on fuel fell 83.5% due to reduced fuel consumption (down 73.7% to 20.75 million) and low jet fuel prices ($1.41 per gallon, down 34.7%). Expenses on passenger servicing declined 83.1% on a year-over-year basis. Moreover, expenses on wages, salaries and other employee benefits fell 44.7% due to temporary work-contract suspensions, voluntary pay cuts and work-hour reductions for employees.

Other Details

Copa Holdings exited the fourth quarter with cash and cash equivalents of $119.1 million compared with $158.73 million at 2019 end. Total debt at the end of the fourth quarter was $1.4 billion.

The company ended the fourth quarter with a consolidated fleet of 75 aircraft — 68 Boeing 737-800s and 7 Boeing 737MAX9s. During the quarter, the company completed the delivery of 5 EMB-190 aircraft.  In December, the company took delivery of a Boeing 737 MAX 9.

Outlook for Q1

Copa Holdings currently expects its capacity to reach approximately 2.6 billion or around 40% of the capacity during first-quarter 2019.

Total revenues are expected in the range of $170-$200 million or 25-30% of total revenues for the first quarter of 2019. Cash consumption (excluding any proceeds from asset sales and extraordinary financing activities) is expected to increase in the range of $40-$45 million per month. However, owing to uncertainty related to the COVID-19 pandemic, the company is not providing its full-year 2021 financial guidance.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -75.7% due to these changes.

VGM Scores

At this time, Copa Holdings has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Copa Holdings has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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