Markets
CPA

Bear of the Day: Copa (CPA)

An image of a stock chart displayed on a tablet
Credit: Shutterstock photo

Copa Holdings, S.A. ( CPA ) is feeling the pain of Brazil's recession. This Zacks Rank #5 (Strong Sell) is expected to see earnings drop by 50% this year.

Copa is a passenger and cargo airline that operates out of Panama City, Panama. It flies 99 aircraft to 74 destinations in 31 countries in North, Central and South America as well as the Caribbean.

Copa had been riding a wave of middle class growth in Brazil and Central America but Brazil's recession and troubles in Venezuela, one of its larger markets, has put a damper on the story.

August Trends Still Down

On Sep 14, Copa announced its August passenger traffic statistics.

Revenue passenger mile (RPM), one of the key airline metrics, fell 3.5% to 1,344 from 1,392 in August of 2014.

The load also fell 3.5 points to 74.4% from 77.9% a year ago as capacity rose 1%. For the year, the load is down 3 points to 75 from 78.

None of this is surprising, however, given the state of the Brazilian economy and the stress on the real.

2015 and 2016 Estimates Fall

Copa is uniquely situated in Central America to tap into the expanding economy there and the increase in air travel for both business and leisure. But right now, it can't do much to escape the economic situation.

The analysts have been cutting both 2015 and 2016 estimates.

Earnings are expected to fall 51% in 2015. The Zacks Consensus Estimate has been cut to $5.47 from $7.59 just 90 days ago.

For 2016, the Zacks Consensus has been slashed as well. It has fallen to just $5.25 from $8.61 just 3 months ago.

This is another 4% decline in earnings.

Shares Plunge to New Multi-Year Lows

Investors have been fleeing Copa's stock for some time. Shares are down 50% in just the last 3 months and are at new 3-year lows.

While they look cheap, with a forward P/E of just 7.6, airlines have historically traded with a lower P/E ratio than the overall market.

Copa also appears to have a juicy dividend, yielding 8.3%, but I would be leery of that sticking around for the long haul if Brazil's economy remains in recession.

Not all airlines are the same right now. The airlines industry is ranked in the top 12% of all Zacks Ranked Industries so some of them are performing well.

If you want to stick with an airline, consider a more US-domestic focus carrier like JetBlue Airways Corporation ( JBLU ). It's a Zacks Rank #1 (Strong Buy) and is expected to grow earnings by 167% this year. You don't have to worry about Brazil with JetBlue.

Want More of Our Best Recommendations?

Zacks' Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential .

Learn More>>

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec .

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

JETBLUE AIRWAYS (JBLU): Free Stock Analysis Report

COPA HLDGS SA-A (CPA): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

CPA JBLU

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More