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Reasons to Avoid Betting on Copa Holdings (CPA) Stock Now
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Copa Holdings’ (CPA - Free Report) prospects are being hurt by high fuel and labor expenses. Weakness pertaining to passenger yield and cargo revenues represents another headwind.
Let’s delve deeper to unearth the factors responsible for making CPA stock an unattractive investment option.
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has been revised 19.1% downward in the past 60 days. For the current year, the consensus mark for earnings has moved 10.4% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Unimpressive Price Performance: Copa Holdings’ shares have lost 10.5% in the past six months compared with its industry’s 0.8% decline.
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Bearish Industry Rank: The industry to which CPA belongs currently has a Zacks Industry Rank of 225 (out of 251). Such an unfavorable rank places it in the bottom 10% of Zacks Industries. Studies have shown that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, taking the industry’s performance into consideration becomes imperative.
Other Headwinds: The Cargo segment’s performance is disappointing. In 2023, cargo and mail revenues declined 4.6% year over year due to lower cargo volumes and yields. Cargo and mail revenues declined in first-half 2024 as well, due to lower cargo yields.
The decline in passenger yield is a concern as the decline in yield results in a reduction of unit revenues. Passenger yield declined 6.3% year over year in first-half 2024, leading to a 6.1% reduction in total revenue per available seat miles (a measure of unit revenues). This was mainly due to a revision of the unredeemed ticket revenue provision for tickets sold so far in the current year.
Escalating operating expenses are hurting Copa Holdings’ bottom line. As evidence, in first-half 2024, total operating expenses increased 3.8% year over year, owing to higher capacity. Expenses on wages, salaries and benefits rose 10% year over year due to an increase in operational staff to support current capacity and cost of living salary adjustments. High fuel costs are pushing up operating costs as well.
CPA currently carries a Zacks Rank #5 (Strong Sell).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Westinghouse Air Brake Technologies (WAB - Free Report) .
CHRW, which is being well-served by its cost-reduction efforts, has an expected earnings growth rate of 25.5% for the current year.
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, delivering an average surprise of 7.3%. Shares of CHRW have gained 22.7% in the last three months.
WAB has a Zacks Rank #2 (Buy) at present and an expected earnings growth rate of 26% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 11.8%. Shares of WAB have climbed 48% in the past year.
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Reasons to Avoid Betting on Copa Holdings (CPA) Stock Now
Copa Holdings’ (CPA - Free Report) prospects are being hurt by high fuel and labor expenses. Weakness pertaining to passenger yield and cargo revenues represents another headwind.
Let’s delve deeper to unearth the factors responsible for making CPA stock an unattractive investment option.
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has been revised 19.1% downward in the past 60 days. For the current year, the consensus mark for earnings has moved 10.4% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Unimpressive Price Performance: Copa Holdings’ shares have lost 10.5% in the past six months compared with its industry’s 0.8% decline.
Bearish Industry Rank: The industry to which CPA belongs currently has a Zacks Industry Rank of 225 (out of 251). Such an unfavorable rank places it in the bottom 10% of Zacks Industries. Studies have shown that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, taking the industry’s performance into consideration becomes imperative.
Other Headwinds: The Cargo segment’s performance is disappointing. In 2023, cargo and mail revenues declined 4.6% year over year due to lower cargo volumes and yields. Cargo and mail revenues declined in first-half 2024 as well, due to lower cargo yields.
The decline in passenger yield is a concern as the decline in yield results in a reduction of unit revenues. Passenger yield declined 6.3% year over year in first-half 2024, leading to a 6.1% reduction in total revenue per available seat miles (a measure of unit revenues). This was mainly due to a revision of the unredeemed ticket revenue provision for tickets sold so far in the current year.
Escalating operating expenses are hurting Copa Holdings’ bottom line. As evidence, in first-half 2024, total operating expenses increased 3.8% year over year, owing to higher capacity. Expenses on wages, salaries and benefits rose 10% year over year due to an increase in operational staff to support current capacity and cost of living salary adjustments. High fuel costs are pushing up operating costs as well.
CPA currently carries a Zacks Rank #5 (Strong Sell).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Westinghouse Air Brake Technologies (WAB - Free Report) .
C.H. Robinson Worldwide currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHRW, which is being well-served by its cost-reduction efforts, has an expected earnings growth rate of 25.5% for the current year.
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, delivering an average surprise of 7.3%. Shares of CHRW have gained 22.7% in the last three months.
WAB has a Zacks Rank #2 (Buy) at present and an expected earnings growth rate of 26% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 11.8%. Shares of WAB have climbed 48% in the past year.