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Why Is Copa Holdings (CPA) Down 18.4% 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 lost about 18.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Copa Holdings Beats on Q4 Earnings

Copa Holdings’  delivered better-than-expected earnings and revenues in the fourth quarter of 2021.

CPA’s fourth-quarter earnings (excluding 71 cents from non-recurring items) of $1.98 per share beat the Zacks Consensus Estimate of $1.15 per share. In the year-ago quarter, the company had incurred a loss of $2 per share due to coronavirus-led depressed air-travel demand.

Quarterly revenues of 575 million also outperformed the Zacks Consensus Estimate of $546.2 million and rose significantly year over year, thanks to an improvement in air travel.

Operational Statistics

Below, we present all comparisons (in % terms) to fourth-quarter 2019 levels (pre-coronavirus).

Passenger revenues (contributed 94% to the top line) plunged 17.8% to $540.6 million in the fourth quarter due to 16.9% less capacity (measured in available seat miles/ASMs).

On a consolidated basis, traffic (measured in revenue passenger miles or RPMs) fell 18.7%. As traffic decline was more than the amount of capacity contraction, load factor (% of seats filled with passengers) contracted 1.8 percentage points to 83.5% in the reported quarter. Passenger revenue per available seat miles dropped 1.1% to 10.6 cents. Additionally, revenue per available seat mile (RASM) rose 1.5% to 11.3 cents. Cost per available seat mile (CASM) declined 23.9%. Excluding fuel, the metric fell 33.8%.

Total operating expenses declined 36.8% to $420 million, backed by lower fuel expenses and reduction in wages, salaries, benefits and other employees' expenses. Expenses on fuel fell 13%, primarily due to reduced fuel consumption (down 22.8% to 61 million). Expenses on wages, salaries and other employee benefits fell 30.1% due to reduced headcount. Passenger servicing costs fell 50.8%. Flight operation costs also plunged 23%.

Other Details

Copa Holdings exited the fourth quarter with cash and cash equivalents of $211.1 million compared with $119.10 million at the end of 2020. Total debt, including lease liabilities, was $1.6 billion at the end of the fourth quarter.

The company exited the fourth quarter with a consolidated fleet of 91 aircraft — 68 Boeing 737-800s, 14 Boeing 737 MAX 9s and nine Boeing 737-700s. During the fourth quarter, Copa Holdings took delivery of one Boeing 737 MAX 9, completed the conversion of one Boeing 737-800 into a freighter and decided to retain three Boeing 737-700s previously classified as assets held for sale.

Outlook

Given the impact of the Omicron variant on capacity, load factor and yields as well as higher fuel prices, CPA expects its operating margin in the range of 3-6% for first-quarter 2022.

Capacity is expected to reach approximately 5.7 billion or roughly 88% of first-quarter 2019’s ASM.

Total revenues are anticipated to be approximately $550 million or about 82% of first-quarter 2019’s total revenue. CASM (ex-fuel) is expected to be 6 cents.

Fuel price per gallon is likely to be $2.79, calling for an increase of 15% quarter over quarter.

For 2022, CPA expects to operate approximately 93% of 2019 ASMs and deliver a CASM (ex-fuel) of approximately 5.9 cents.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -59.27% due to these changes.

VGM Scores

Currently, Copa Holdings has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, 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 A. 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. 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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