Copa Holdings (CPA) to Post Q2 Financials: What's in Store?

Copa Holdings, S.A. CPA is scheduled to report second-quarter 2020 financial numbers on Aug 5, after market close.

The Zacks Consensus Estimate for second-quarter bottom line has widened from a loss of $3.20 per share to a loss of $3.38 per share in the past 60 days. Nevertheless, the company has an impressive earnings history. The company’s earnings have outperformed the Zacks Consensus Estimate in all of the preceding four quarters. Copa Holdings has a trailing four-quarter earnings surprise of 10.5%, on average.

Copa Holdings, S.A. Price and EPS Surprise

Copa Holdings, S.A. Price and EPS Surprise

Copa Holdings, S.A. price-eps-surprise | Copa Holdings, S.A. Quote

Let’s discuss the factors that are likely to have influenced the carrier’s second-quarter performance.

Low air travel demand due to the coronavirus pandemic is likely to have dented Copa Holding’s second-quarter performance and hurt passenger revenues. To tackle low demand, the company resorted to capacity cuts.  This measure was undertaken due to rise in government travel restrictions amid coronavirus concerns. The Zacks Consensus Estimate for capacity (measured in available seat miles) and traffic (measured in revenue passenger miles) suggests a 95.5% and 98.6% decline on a sequential basis, respectively. Since expected decline in traffic outweighs expected capacity contraction, load factor (% of seats filled by passengers) is likely to have declined in the to-be-reported quarter. Notably, Zacks Consensus Estimate for load factor in the June quarter is currently pegged at 69.5% compared with 82% reported in the first quarter of 2020.

The consensus estimate for passenger revenue per available seat mile suggests a decline 32.4% from March-end reported figure. The Zacks Consensus Estimate for passenger revenues indicates a 97% decline sequentially.

Copa Holdings, which competes with the likes of Gol Linhas GOL, in the Latin American aviation space expects its non-fuel unit costs to have escalated during the to-be-reported quarter thanks to COVID-19 induced lower capacity.

With coronavirus affecting demand significantly, low fuel prices are expected to have partly offset the adversities and contributed to the bottom line in the second quarter. The consensus mark for fuel cost per gallon indicates 38.5% decline from its March-end reported figure.

Earnings Whispers

The proven Zacks model conclusively predicts an earnings beat for Copa Holdings this time around. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings ESP: Copa Holdings has an Earnings ESP of 19.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Copa Holdings carries a Zacks Rank #3, currently.

Highlights of Q1 Earnings

Copa Holdings’ earnings of $1.75 per share beat the Zacks Consensus Estimate by 19 cents. However, the bottom line fell 17.1% year over year primarily due to lower revenues. Quarterly revenues also declined 11.4% to $595.5 million, which beat the Zacks Consensus Estimate of $592.8 million. The downside was caused by 11.4% fall in passenger revenues. Notably, passenger revenues contributed 96.5% to the top line in the reported quarter.

Stocks to Consider

Investors interested in the broader Transportation sector may check out a few stocks worth considering like Golar LNG GLNG and Star Bulk Carriers Corp. SBLK.

Golar LNG has an Earnings ESP of +10.00% and a Zacks Rank #3 at present.

Star Bulk Carriers has an Earnings ESP of +9.68% and is Zacks #3 ranked, presently. The company will release second-quarter 2020 results on Aug 5.

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

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