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Low Fuel Costs Aid Copa Holdings Amid Travel Demand Drop

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We recently issued an updated report on Copa Holdings, S.A. (CPA - Free Report) . Factors like low fuel prices are encouraging. Meanwhile, dwindling air travel demand amid coronavirus issues are major challenges.

The current scenario of low fuel prices is favorable for Copa Holdings. This is because fuel costs comprise a major portion of any airline company’s bottom line.  Notably, the effective price per gallon of jet fuel (inclusive of into-plane costs) is projected to be $1.95 in 2020, lower than the 2019 figure of $2.16.

We are also encouraged by the company's efforts to reward its shareholders. To this end, the carrier announced a 23% hike in quarterly dividend to 80 cents per share (annualized: $3.20 per share) in February.


Dwindling air travel demand due to the coronavirus outbreak is likely to hurt Copa Holdings' performance in 2020. Thanks to the extremely-low demand scenario, Copa Holdings suspended all international flights effective Mar 22 through Apr 21.

Increase in non-fuel unit costs (up 6.4% in fourth-quarter 2019) due to lower capacity stemming from the grounding of the MAX fleet is a concern. Again, non-fuel unit costs are likely to increase going forward, as capacity is likely to decline further following the pandemic. This might limit bottom-line growth.

Zacks Rank and Stocks to consider

Currently, Copa Holdings carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Transportation sector are GATX Corporation (GATX - Free Report) , Teekay Tankers Ltd. (TNK - Free Report) and Höegh LNG Partners LP (HMLP - Free Report) .  All carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term (three to five years) expected earnings per share growth rate for GATX, Spirit and Höegh LNG is pegged at 15%, 12.5% and 8.5%, respectively.

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