Copa Holdings SA - Growth & Income

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Copa Holdings SA ( CPA ) has enjoyed positive earnings estimate revisions over the last couple of months after reporting strong third-quarter results, which included a positive surprise of almost 5%. Furthermore, this provider of airline passenger and cargo services currently offers a dividend yield of 2.28%. With a long-term expected earnings growth rate of 19.6%, this Zacks #2 Rank (Buy) has solid opportunities, backed by expansion plans, optimization of route networks and advanced technological applications.

A Bright Third Quarter

On November 7, Copa Holdings posted impressive third-quarter 2012 results, including earnings per share of $2.20 that surpassed the Zacks Consensus Estimate of $2.10 by 4.8%. The result also shot up 8.4% year over year. Total revenue was $590.4 million, exceeding the Zacks Consensus Estimate of $573.0 million and improving from last year by 24.5%. The performance was buoyed by a 23.8% rise in passenger traffic and a 26.6% advance in capacity expansion.

Earnings Estimates

For 2012, the Zacks Consensus Estimate of $7.86 implies a year-over-year increase of 11.3%. For 2013, the Zacks Consensus Estimate has advanced 1.2% in 60 days to $9.19, implying year-over-year growth of 17.0%.

Dividend Yield

In late November, the board of directors of Copa Holdings announced a dividend payout of $2.25 per share (reflecting almost 30% of the estimated annual consolidated net income for 2012). The dividend was raised by 7.1% from the prior level. Currently, the company offers a lucrative dividend yield of 2.28%, significantly higher than the industry average of 0.6% and the company's 5-year average yield of 1.50%.

Attractive Valuation

Copa Holdings currently trades at a forward P/E multiple of 12.6, which is almost in line with that of the peer group average of 12.3. Also, the stock's trailing 12-month ROE of 22.7% is substantially higher than the peer group average of 16.5%. The PEG ratio comes in at 0.64, a 36% discount to the benchmark of 1 for a fairly priced stock.


The chart below displays an upward price movement since September this year. The stock has been consistently trading above its 50 and 200-day moving averages. The widening gap between the stock price line and that of 50 and 200-day moving averages show the growth potential of Copa Holdings.

Panama-based Copa Holdings has been running operations over the last 65 years in 63 destinations on 29 countries, spreading across North, Central and South America, and the Caribbean. The company - with a market capitalization of $4.36 billion - provides passenger and cargo services through two major operating subsidiaries - Copa Airlines and Copa Airlines Colombia. Currently, the company operates a consolidated fleet of 82 aircraft. Management aims to expand the company's horizon by bringing in more flights and destinations in the coming months.

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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.

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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