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Here's Why Investors Should Hold on to Copa Holdings (CPA)
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Copa Holdings (CPA - Free Report) capitalizes on rising air travel demand and strategic fleet upgrades but faces threats such as low liquidity and weakened cargo performance.
Factors Favoring CPA
Copa Holdings' proactive fleet modernization includes replacing outdated models. The company had 106 aircraft in its fleet at the end of 2023, featuring 67 Boeing 737-800s, 29 Boeing 737 MAX 9s, nine Boeing 737-700s and one Boeing 737-800 freighter. CPA aims to expand the fleet to 117 aircraft by the end of 2024
Copa Holdings' robust 2023 performance reflects a 16.7% yearly increase in total operating revenues, driven by a 17.5% surge in passenger revenues amid upbeat air travel demand. With a positive outlook, management anticipates an 86-87% load factor (% of seats filled by passengers) for the current year. Our projection for 2024 is a steady 86.6%.
Key Risks
The Cargo segment faced a setback in 2023, experiencing a 4.6% decline in revenues. This downturn is attributed to lower cargo volumes and yields, contributing to an overall disappointing segmental performance.
The company's current ratio (a measure of liquidity) of 0.94 at the end of the fourth quarter of 2023 signals potential liquidity challenges as it implies insufficient liquid assets to cover short-term liabilities, raising concerns about its financial stability.
In 2023, a 14.8% surge in employee expenses resulted from the expansion of operational staff, salary adjustments and variable compensation provisions. Passenger servicing costs saw a 27.2% increase due to a rise in onboard passengers and product offering upgrades. Flight operation expenses rose by 13% with an increase in block hours (a measure of aircraft utilization).
GATX currently carries a Zacks Rank #2 (Buy) and has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the past four quarters (missing the mark in the remaining one). The average beat is 16.47%.
The Zacks Consensus Estimate for 2024 earnings has been revised 9% upward over the past 90 days. GATX has an expected earnings growth rate of 6.5% for 2024. Shares of GATX have risen 26% in the past year.
SkyWest's fleet modernization efforts are commendable. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 26.3% over the past 90 days. Shares of SkyWest have surged 242.3% in the past year. SKYW currently sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has an expected earnings growth rate of more than 100% for 2024. SKYW delivered a trailing four-quarter earnings surprise of 128.02%, on average.
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Here's Why Investors Should Hold on to Copa Holdings (CPA)
Copa Holdings (CPA - Free Report) capitalizes on rising air travel demand and strategic fleet upgrades but faces threats such as low liquidity and weakened cargo performance.
Factors Favoring CPA
Copa Holdings' proactive fleet modernization includes replacing outdated models. The company had 106 aircraft in its fleet at the end of 2023, featuring 67 Boeing 737-800s, 29 Boeing 737 MAX 9s, nine Boeing 737-700s and one Boeing 737-800 freighter. CPA aims to expand the fleet to 117 aircraft by the end of 2024
Copa Holdings' robust 2023 performance reflects a 16.7% yearly increase in total operating revenues, driven by a 17.5% surge in passenger revenues amid upbeat air travel demand. With a positive outlook, management anticipates an 86-87% load factor (% of seats filled by passengers) for the current year. Our projection for 2024 is a steady 86.6%.
Key Risks
The Cargo segment faced a setback in 2023, experiencing a 4.6% decline in revenues. This downturn is attributed to lower cargo volumes and yields, contributing to an overall disappointing segmental performance.
The company's current ratio (a measure of liquidity) of 0.94 at the end of the fourth quarter of 2023 signals potential liquidity challenges as it implies insufficient liquid assets to cover short-term liabilities, raising concerns about its financial stability.
In 2023, a 14.8% surge in employee expenses resulted from the expansion of operational staff, salary adjustments and variable compensation provisions. Passenger servicing costs saw a 27.2% increase due to a rise in onboard passengers and product offering upgrades. Flight operation expenses rose by 13% with an increase in block hours (a measure of aircraft utilization).
Zacks Rank
CPA currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include GATX Corporation (GATX - Free Report) and SkyWest Inc. (SKYW - Free Report) .
GATX currently carries a Zacks Rank #2 (Buy) and has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the past four quarters (missing the mark in the remaining one). The average beat is 16.47%.
The Zacks Consensus Estimate for 2024 earnings has been revised 9% upward over the past 90 days. GATX has an expected earnings growth rate of 6.5% for 2024. Shares of GATX have risen 26% in the past year.
SkyWest's fleet modernization efforts are commendable. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 26.3% over the past 90 days. Shares of SkyWest have surged 242.3% in the past year. SKYW currently sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has an expected earnings growth rate of more than 100% for 2024. SKYW delivered a trailing four-quarter earnings surprise of 128.02%, on average.