Copa is a passenger and cargo airline operating out of Panama City, Panama with service to 74 destinations in 31 countries in North, Central and South America and the Caribbean. It operates 99 aircraft including 78 Boeing &37NG and 21 EMBRAER-190s.
October Traffic Spikes
On Nov 10, Copa reported its October 2015 system-wide passenger traffic (RPMs) rose 13.7% year over year. Capacity (ASMs) increased just 1.4%.
System load factor for October was 83.3%, a big 9% improvement over the year ago month.
New Low Cost Brand
In October, Copa announced it would begin operating a new low cost airline with basic airfares and few frills for the Central American market on December 1, 2016 called wingo.com.
Looking at the website, which is in Spanish to appeal to that market, it looks like many flights will originate out of Bogota. In a reflection of the growing middle class, and wealth, in Colombia, many of the flights are to tourist destinations including to Cancun, Aruba, Punta Cana as well as Havana, Caracas and Mexico City.
The start-up airline will also fly some domestic Colombian routes as well.
Colombia is among the fastest growing aviation markets in Central and South America.
Fourth Beat in a Row in the Third Quarter
On Nov 8, Copa reported its third quarter results and beat the Zacks Consensus for the fourth quarter in a row. Copa beat the Zacks Consensus Estimate by 2 cents, reporting $1.30 versus the consensus of $1.28.
Revenue rose 4% to $569 million as higher load factors offset a 7.6% reduction in yield per passenger mile.
For the third quarter, RPMs rose 12.7% year-over-year with 2% capacity expansion. As a result, consolidated load factor was 84.2%, or 8% better than the third quarter of 2015.
The airline used to be one of the largest operators in Venezuela but it has since pulled out of a lot of the operations there.
Still, as of the third quarter, it had short-term investments which included $265 million of cash in Venezuela as of September 2014. Long-term investments include $427 million and $239 million of cash in Venezuela as of September 2014 and 2015.
Earnings Turning Around
It’s been a rough 2-years for Copa with its problems in Venezuela and falling earnings.
Earnings are expected to fall 3.5% this year but it looks to be the bottom. Earnings are expected to rebound 49.7% in 2017.
However, as you can see in this 5-year price and consensus chart, Copa still has a ways to go before it gets back to its earlier earnings levels.
Are Shares a Deal?
Shares are up off the lows but still well off their 5-year highs. They also haven’t yet hit 2-year highs.
But even though earnings are turning around, the shares are rising faster than the estimates. The result is a forward P/E of 19.6, which is among the highest in the airline industry. Shares are not a deal here.
You will get a dividend, currently yielding 2.2%, for your troubles however.
But given the expected growth rate in Central America, Copa is definitely a company to keep on your short list if you’re interested in investing in the region.
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