Can Copa Holdings (CPA) Pull A Surprise In Q3 Earnings?

Copa Holdings SA (NYSE:CPA) is scheduled to report third-quarter 2016 results, after the market closes on Nov 8.

In the second quarter of 2016, the carrier reported a positive earnings surprise of 121.74%. The company has an impressive record with respect to earnings as it topped the Zacks Consensus Estimate in three of the last four quarters with an average beat of 37.04%.

Let’s see how things are shaping up for the upcoming announcement.

Factors at Play

Copa Holdings, like most other Latin American carriers, is been going through tough times due to a weak economy and adverse foreign currency movements. The forecast made by the International Air Transport Association that Latin American carriers, which include the likes of GOL Linhas Aereas Inteligentes S.A. (NYSE:GOL) and Copa Holdings, will account for only $0.1 billion of the estimated $39.4 billion global net profit in 2016. This further highlights the sorry state of affairs for carriers in this region.

We believe that the carrier will struggle on the top-line front in the third quarter. Notably, the carrier had recorded a year-over-year decline in revenues in the second quarter as well. Revenues are likely to be hurt by the strengthening of the dollar against the Brazilian real.

Apart from Brazil’s recession, the economic slowdown in Venezuela – one of Copa Holdings’ key markets – raises concerns. Moreover, the company faces stiff competition in the Latin American aviation space from the likes of LATAM Airlines (NYSE:LFL) , Azul Brazilian Airlines and GOL Linhas. This is also likely to limit growth for the carrier.

Nonetheless, we are impressed with the company’s efforts to reward shareholders.

COPA HLDGS SA-A Price and EPS Surprise

COPA HLDGS SA-A Price and EPS Surprise | COPA HLDGS SA-A Quote

Earnings Whispers

Our quantitative model doesn’t conclusively show that an earnings beat is likely in the third quarter for the carrier. This is because the company lacks the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – that increases the chance of a positive earnings surprise.

Zacks ESP: Earnings ESP for Copa Holdings is -0.78%. This is because the Most Accurate estimate is currently pegged at $1.27 per share while the Zacks Consensus Estimate is a penny higher. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises

Zacks Rank :Copa Holdings sports a Zacks Rank #1 (Strong Buy). However, our surprise predication is complicated by the company’s negative Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.

As a caution, we advise investors against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

A stock to Consider

Here is a company you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Navios Maritime Holdings Inc. (NYSE:NM) is expected to report third-quarter earnings on Nov 28. The company has an Earnings ESP of +16.00% and a Zacks Rank #2.

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