Copa Holdings (CPA) Tops Q4 Earnings Estimates, Ups Dividend

Copa Holdings’ (NYSE:CPA) fourth-quarter 2019 earnings of $2.17 per share (excluding $2.11 from non-recurring items) beat the Zacks Consensus Estimate by 19 cents. Moreover, the bottom line surged more than 100% year over year primarily owing to higher revenues and low fuel costs. Quarterly revenues also increased 3.9% to $681.9 million, which beat the Zacks Consensus Estimate of $666.9 million. The uptick can be attributed to a 4.1% increase in passenger revenues. Notably, passenger revenues contributed 96.45% to the top line in the reported quarter.

Operational Statistics

While passenger unit revenue per available seat mile (PRASM) ascended 9.2%, yield per passenger mile rose 6%. On a consolidated basis, traffic (measured in revenue passenger miles or RPMs) dipped 1.7% and capacity (or available seat miles/ASMs) slid 4.6% due to the MAX groundings in the December-end quarter. As capacity contraction was more than traffic plunge, consolidated load factor (% of seats filled with passengers) improved 250 basis points to 85.3%. Meanwhile, unit revenue per available seat mile (RASM) increased 8.9%.

Average fuel price per gallon declined 9.2% in the reported quarter to $2.16. However, operating cost per available seat mile (CASM), excluding special Items (adjusted CASM) increased 1.4% to 9.3 cents in fourth-quarter 2019. The metric excluding fuel costs increased 6.4% to 6.6 cents, mainly due to lower capacity as well as expenses associated with the Boeing (NYSE:BA) MAX fleet grounding. With the ongoing groundings, the company removed all MAX flights from its schedule until the end of August 2020.

Liquidity

The company exited the year with cash and cash equivalents of $158.73 million compared with $156.16 million at 2018 end. Long-term debt declined to $938.2 million from $975.3 million at the end of 2018.

Dividend Update

This Zacks Rank #4 (Sell) carrier announced a 23% hike in quarterly dividend to 80 cents per share (annualized: $3.20 per share). The first quarterly dividend will be paid out on Mar 13 to shareholders on record as of Feb 28, 2020.

Fleet Update

Copa Holding ended the year with a consolidated fleet of 102 aircraft — 6 Boeing 737MAX9s, 68 Boeing 737- 800s, 14 Boeing 737-700s and 14 Embraer 190s.

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Outlook for 2020

Even after prolonged period of MAX groundings, Copa Holdings now anticipates capacity to inch up 1% year over year compared with 2.7% decline in 2019. However, with modest fuel prices and the rising revenue trends, the company expects operating margin in the range of 18-20%. Notably, the company’s operating margin in 2019 was 16.1%. Meanwhile, the effective price per gallon of jet fuel (inclusive of into-plane costs) is projected at $1.95.

Upcoming Releases

Investors interested in the broader Transportation sector are awaiting fourth-quarter 2019 earnings reports from key players like Air Lease Corporation (NYSE:AL) , Expeditors International of Washington (NASDAQ:EXPD) and Hertz Global Holdings (NYSE:HTZ) .

Air Lease and Expeditors will announce results on Feb 14 and Feb 18, respectively. Hertz will release fourth-quarter numbers on Feb 24.

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