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Solid Traffic Data Shields Copa (CPA) From Cost Concerns
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The uptick in air-travel demand (particularly on the leisure front) bodes well for the Latin American carrier Copa Holdings (CPA - Free Report) , currently carrying a Zacks Rank #3 (Hold). However, escalated fuel costs, a primary headwind, are limiting bottom-line growth.
The gradual improvement in air-travel demand is a huge boon for Copa Holdings. Owing to this tailwind, CPA reported healthy traffic data for October. In the same month, its consolidated traffic increased 10.2% from the October 2019 figure (pre-coronavirus era).
To match the increased demand situation, CPA is expanding its capacity. In October 2022, capacity expanded 5.2% from the level witnessed three years ago. Since traffic growth was more than capacity expansion, the load factor (percentage of seats filled by passengers) improved 4.1 percentage points (p.p) from October 2019 reading to 89% last month. Recovery in air traffic apart, Copa Holdings’ efforts to modernize its fleet bode well. Upbeat cargo revenues are also likely to bolster CPA’s top line.
A Key Risk
Escalating fuel costs pose a threat to Copa Holdings’ bottom line. Oil price is moving north, primarily because of supply concerns stemming from Russia's invasion of Ukraine. In the September quarter of 2022, the average fuel cost per liter surged 76.6% from the third-quarter 2019 actuals. Fuel price is likely to be high in the December quarter as well.
Mainly due to high fuel costs, shares of Copa Holdings have declined 4.5% so far this year.
Image Source: Zacks Investment Research
Stocks to Consider
In the broader Zacks Transportation sector, investors may consider better-ranked stocks like Covenant Logistics (CVLG - Free Report) and Ryder System (R - Free Report) .
Covenant Logistics offers a portfolio of transportation and logistics services, including asset-based expedited, dedicated and irregular route truckload capacity besides asset-light warehousing, transportation management and freight brokerage capability.
The gradually improving freight market scenario is a tailwind to Covenant. CVLG’s cost-control efforts are appreciated as well. CVLG currently sports a Zacks Rank #1. The stock has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 10.1% upward over the past 60 days.
Miami, FL-based Ryder provides integrated logistics and transportation solutions. With improved economic and freight market conditions, R is benefiting from higher rental revenues owing to strong demand and favorable pricing. R’s acquisitions of Whiplash and Midwest Warehouse & Distribution System expand its e-commerce fulfillment network and boost multi-client warehousing capabilities. The transactions are expected to drive growth in the supply-chain solutions segment.
Ryder currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for R’s 2022 earnings has been revised 7% upward in the past 60 days.
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Solid Traffic Data Shields Copa (CPA) From Cost Concerns
The uptick in air-travel demand (particularly on the leisure front) bodes well for the Latin American carrier Copa Holdings (CPA - Free Report) , currently carrying a Zacks Rank #3 (Hold). However, escalated fuel costs, a primary headwind, are limiting bottom-line growth.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Factors Favoring CPA
The gradual improvement in air-travel demand is a huge boon for Copa Holdings. Owing to this tailwind, CPA reported healthy traffic data for October. In the same month, its consolidated traffic increased 10.2% from the October 2019 figure (pre-coronavirus era).
To match the increased demand situation, CPA is expanding its capacity. In October 2022, capacity expanded 5.2% from the level witnessed three years ago. Since traffic growth was more than capacity expansion, the load factor (percentage of seats filled by passengers) improved 4.1 percentage points (p.p) from October 2019 reading to 89% last month. Recovery in air traffic apart, Copa Holdings’ efforts to modernize its fleet bode well. Upbeat cargo revenues are also likely to bolster CPA’s top line.
A Key Risk
Escalating fuel costs pose a threat to Copa Holdings’ bottom line. Oil price is moving north, primarily because of supply concerns stemming from Russia's invasion of Ukraine. In the September quarter of 2022, the average fuel cost per liter surged 76.6% from the third-quarter 2019 actuals. Fuel price is likely to be high in the December quarter as well.
Mainly due to high fuel costs, shares of Copa Holdings have declined 4.5% so far this year.
Image Source: Zacks Investment Research
Stocks to Consider
In the broader Zacks Transportation sector, investors may consider better-ranked stocks like Covenant Logistics (CVLG - Free Report) and Ryder System (R - Free Report) .
Covenant Logistics offers a portfolio of transportation and logistics services, including asset-based expedited, dedicated and irregular route truckload capacity besides asset-light warehousing, transportation management and freight brokerage capability.
The gradually improving freight market scenario is a tailwind to Covenant. CVLG’s cost-control efforts are appreciated as well. CVLG currently sports a Zacks Rank #1. The stock has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 10.1% upward over the past 60 days.
Miami, FL-based Ryder provides integrated logistics and transportation solutions. With improved economic and freight market conditions, R is benefiting from higher rental revenues owing to strong demand and favorable pricing. R’s acquisitions of Whiplash and Midwest Warehouse & Distribution System expand its e-commerce fulfillment network and boost multi-client warehousing capabilities. The transactions are expected to drive growth in the supply-chain solutions segment.
Ryder currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for R’s 2022 earnings has been revised 7% upward in the past 60 days.