A month has gone by since the last earnings report for Copa Holdings (CPA - Free Report) . Shares have lost about 7.6% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at Copa Holdings in Q2
Copa Holdings' second-quarter 2019 earnings of $1.20 per share beat the Zacks Consensus Estimate of $1.05. Moreover, the bottom line improved year over year on impressive revenue growth.
Quarterly revenues inched up 1.7% to $645 million, above the Zacks Consensus Estimate of $627 million. The upside was owing to 1.5% increase in passenger revenues.
While passenger unit revenue per available seat mile (PRASM) ascended 6.1%, yield per passenger mile was up 4.1%. However, on a consolidated basis, traffic (measured in revenue passenger miles or RPMs) dipped 2.5% while capacity (or available seat miles/ASMs) slid 4.3% (due to the MAX groundings) in the reported quarter. As capacity decline was more than the contraction in traffic, consolidated load factor improved 160 basis points (bps) to 85.1%.
Meanwhile, unit revenue per available seat mile (RASM) augmented 6.3%. However, operating cost per available seat mile (CASM) inched up 2.5% in the reported quarter due to the grounding of the MAX fleet. The metric excluding fuel costs increased 5.7% on account of lower capacity from the aforementioned headwind. Also, average fuel price per gallon escalated 5.3% year over year to $2.22. With the ongoing groundings, the company has removed all MAX flights from its schedule through Dec 15, 2019.
The company exited the second quarter with cash and cash equivalents of $226.14 million compared with $156.16 million at the end of 2018. Long-term debt amounted to $1 billion compared with $975.28 million at the end of last December.
The company’s board has cleared a quarterly cash dividend of 65 cents per share, payable Sep 13, 2019 to shareholders of record as of Aug 30.
2019 Outlook Revised
Due to the prolonged period of MAX groundings, Copa Holdings now anticipates capacity to slip 2% year over year compared with an increase of 1% expected previously. However, with fuel prices at modest levels and rising revenue trends, the company expects operating margin in the 15-17% range, up from the band of 12-14% estimated previously. This indicates a favorable comparison with 13% achieved in 2018. Meanwhile, effective price per gallon of jet fuel is predicted at $2.15 compared with $2.25 forecast previously.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 28.97% due to these changes.
At this time, Copa Holdings has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Copa Holdings has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.