CPA

Why Copa Holdings Stock Dropped 15% Today

Copa crew standing in front of airplane

What happened

Shares of airline owner Copa Holdings (NYSE: CPA) closed 14.6% lower on Thursday after the Panama City carrier reported Q2 2018 earnings that fell short of estimates.

Analysts who follow Copa had predicted the company would earn $1.28 per share on sales of $652.8 million in Q2. Instead, Copa reported per-share profits of only $1.18 on sales of $634.1 million.

So what

Year over year, Copa's sales declined 10%, and its earnings nearly 15%. This was despite a 13% increase in traffic.

Operating profit margins declined by more than one-third to 9%, hurt in part by a 33% spike in fuel costs during the quarter -- but the slower growth in sales relative to traffic suggests that lower plane ticket prices were also a factor.

Now what

Management did not give new guidance for what to expect over the rest of this year. (Analysts, for what it's worth, are predicting a full year profit of $9.61 per share on nearly $2.9 billion in sales). But toward the end of its announcement, Copa did mention a development that promises to expand its services and potentially draw in even more customers going forward: To wit, Copa "has been in discussions with United Airlines" and also with local rival airline Avianca Holdings "regarding the possibility of establishing a three-way joint business agreement that would cover our combined network between the United States and Latin America."

Management cautioned that it "can provide no assurances as to whether or when the parties will finalize the agreement." But it does appear to be in the works, and the stock could well benefit later on if a deal is completed.

10 stocks we like better than Copa Holdings

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Copa Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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.

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.