Copa Holdings Reaches 52-Week High: What's Driving It?

Shares of Copa Holdings, S.A. (NYSE:CPA) hit a 52-week high of $134.91 per share during the trading session on Nov 20 before retracing a bit to close at $134.72. Notably, the company’s shares have performed impressively in a year. The stock has surged 44.2%, comfortably outperforming the industry’s rally of 13%.

Catalysts Behind the Upsurge

The improved Latin American economy has been aiding the company for quite some time now. The carrier has also been benefitting from strong demand for air travel.

The airline has posted encouraging traffic results in the past few months. Recently, the company reported October traffic results, wherein traffic, measured in revenue passenger miles (RPMs), increased 13.5%, while load factor (percentage of seats filled by passengers) expanded 150 basis points (bps) to 84.8% in the month. This was because traffic growth outpaced capacity expansion.

The company’s third-quarter results are noteworthy, as well. Both earnings and revenues improved significantly in the quarter, surpassing estimates. Results were aided by higher passenger revenues.

On the back of a positive Latin American picture, the company anticipates the high demand for air travel to continue even in the coming years. In fact, it has raised its guidance for 2017 load factor and RASM (revenue per available seat mile) buoyed by this optimism. The company now expects load factor of approximately 83% and RASM of around 10.5 cents. Previous guidance had called for a rise of 82% in load factor and 10.4 cents in RASM.

The airline has also seen a positive trend with regard to unit revenues and costs. Notably, passenger unit revenue per available seat mile (PRASM) improved 3.1% in the third quarter, while RASM rose 2.4%. On the other hand, operating cost per available seat mile (CASM) decreased 3.2%, while CASM excluding fuel costs slipped 1.2% in the quarter. Further, the carrier expects to realize significant cost savings by the year-end, which should help lowering unit costs.

With costs reducing and revenues rising, operating margin is expected to expand going forward. The company estimates operating margin between 17% and 18% in 2017 compared with 12.4% reported in 2016. Whereas, for 2018, it estimates an operating margin of 17-19%. Over the long term, the company projects an operating margin of 20% and beyond.

Zacks Rank & Stocks to Consider

Copa Holdings carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the airline space are International Consolidated Airlines Group (LON:ICAG) SA (OTC:ICAGY) , Deutsche Lufthansa (DE:LHAG) AG (OTC:DLAKY) and SkyWest, Inc. (NASDAQ:SKYW) . While International Consolidated Airlines sports a Zacks Rank #1 (Strong Buy), Deutsche Lufthansa and SkyWest carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of International Consolidated Airlines, Deutsche Lufthansa and SkyWest have surged more than 40%, 100% and 37%, respectively, in a year.

Zacks' Hidden Trades

While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?

Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.

Click here for Zacks' secret trade>>