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Here's Why Investors Should Hold Copa Holdings (CPA) Now

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Copa Holdings, S.A. (CPA - Free Report) is benefiting from fleet modernization techniques and rising air-travel demand.

Factors Favoring CPA

Upbeat air-travel demand aided Copa Holdings' performance in third-quarter 2023. Operating revenues for the September quarter improved 7.2% year over year on the back of passenger revenues. Passenger revenues (contributed 96% to the top line) increased 7.6% from third-quarter 2022 actuals owing to higher load factors and yields. For full-year 2023, we estimated the metric to jump 15.4% year over year.

On a consolidated basis, traffic (measured in revenue passenger miles) and capacity (measured in available seat miles) grew 13.3% and 12.1%, respectively. As a result, load factor expanded 0.9 percentage points to 87.8% in the reported quarter.

For 2023, Copa Holdings expects consolidated capacity or ASMs to register 13% growth year over year. Operating margin is projected to be 23%. Load factor is now forecast to be around 87%.

We are encouraged by Copa Holdings' initiatives to modernize its fleet.  Apart from adding planes, this carrier is replacing the outdated models as part of its fleet modernization efforts. CPA exited 2022 with a consolidated fleet of 97 aircraft, which comprises 67 Boeing 737-800s, 20 Boeing 737 MAX 9s, nine Boeing 737-700s and one Boeing 737-800 freighter.

Copa Holdings’ ended third-quarter 2023 with a consolidated fleet of 103 aircraft, which comprises 67 Boeing 737-800s, 26 Boeing 737 MAX 9s, nine Boeing 737-700s and one Boeing 737-800 freighters. Copa Holdings’ expects to end 2023 with 106 aircraft.

Key Risks

CPA’s current ratio (a measure of liquidity) was 0.96 at the end of third-quarter 2023. A current ratio of less than 1 implies that the company doesn't have enough liquid assets to cover its short-term liabilities.

Zacks Rank

CPA currently carries Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks for investors interested in the Zacks Transportation sector are Air Canada (ACDVF - Free Report) and SkyWest (SKYW - Free Report) .

Air Canada currently sports a Zacks Rank #1 (Strong Buy). An uptick in passenger traffic is aiding ACDVF. Recently, management announced plans to launch a new year-round route between Montreal and Madrid.  You can see the complete list of today’s Zacks #1 Rank stocks here..

The service will commence in May of the following year as part of its expanded international summer 2024 flying schedule to cater to increased demand.  

SkyWest currently carries a Zacks Rank #2 (Buy). SKYW's fleet-modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for current-quarter earnings has surged 83.3% in the past 60 days.
 


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