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Copa Holdings (CPA) Likely to Beat on Q4 Earnings: Here’s Why


Copa Holdings, S.A. CPA is slated to release fourth-quarter 2017 results on Feb 21, after the market closes.

Last quarter, the company delivered a positive earnings surprise of 10.2%. Copa Holdings has also surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters, with an average beat of approximately 6.4%.

Notably, the stock’s impressive earnings history is well reflected in its robust price performance in a year’s time. Copa Holdings has gained 24.3%, easily outperforming the Zacks Airline industry’s 5.1% rally.

Things look rosy for the company in the soon-to-be reported quarter as well. Strong passenger revenues are likely to boost results.

In fact, the stock has seen the Zacks Consensus Estimate for fourth-quarter 2017 being revised 0.5% upward over the last 30 days to $2.33 per share. This reflects a year-over-year improvement of 64.1%. The consensus mark for sales of $663.41 also indicates a 10.3% growth from the prior-year quarter.

Given this backdrop, let’s delve deeper to find out the factors likely to have a bearing on the company’s results in the quarter to be reported.

We expect Copa Holdings’ fourth-quarter results to benefit from strong demand for air travel. The Zacks Consensus Estimate for passenger revenues in the quarter is pegged at $648 million, higher than the $577 million in the fourth quarter of 2016. Additionally, the consensus estimate for passenger revenues per available seat miles (PRASM: a key measure of unit revenue) stands at 11 cents, 10% higher than the figure reported a year-ago.

Impressive traffic growth is likely boost the carrier’s load factor (% of seats filled by passengers) as well. The Zacks Consensus Estimate for fourth-quarter load factor is pegged at 83%, higher than the figure of 82% reported a year-ago. Meanwhile, improved economic scenario in Latin America is boosting demand for air travel, which in turn should aid passenger revenues in the quarter. Moreover, we are encouraged by the carrier’s initiatives to expand its operations and modernize its fleet.

However, increased fuel costs are likely to limit bottom-line growth at Copa Holdings. The Zacks Consensus Estimate for fourth-quarter fuel costs per gallon is pegged at $1.94, well above $1.82 reported in the third quarter of 2017.

What Does Our Model Indicate?

Our proven model too shows that Copa Holdings is likely to beat on earnings in the to-be-reported quarter. This is because the stock has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase its odds of an earnings surprise.

Zacks ESP: Copa Holdings has an Earnings ESP of +1.84% as the Most Accurate estimate of $2.37 is pegged above the Zacks Consensus Estimate by 4 cents. 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, which when combined with a positive ESP, makes us confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Copa Holdings is not the only company in the Zacks Transportation industry that is looking up this earnings season. Here are some companies from the same space, which according to our model also have the right combination of elements to post an earnings beat:

LATAM Airlines LTM has an Earnings ESP of +13.64% and a Zacks Rank #2 (Buy). The company will report fourth-quarter 2017 results on Mar 14. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Diana Shipping DSX has an Earnings ESP of +5.28% and a Zacks Rank of 3. The company will report fourth-quarter 2017 results on Feb 22.

Trinity Industries TRN has an Earnings ESP of +1.59% and a Zacks Rank #3. The company will report fourth-quarter 2017 results on Feb 21.

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