What’s in Store for Copa Holdings (CPA) in Q3 Earnings?

Copa Holdings CPA is scheduled to report third-quarter 2017 financial numbers on Nov 8, after the market closes.

Last quarter, the carrier delivered a positive earnings surprise of 4.2%. The company’s second-quarter earnings (on an adjusted basis) of $1.48 per share beat the Zacks Consensus Estimate of $1.42. The bottom line also came well above the year-ago figure of 51 cents. Revenues improved 16.8% year over year to $578.1 million. The top line also beat the Zacks Consensus Estimate of $548 million.

Let’s see, how things shape up for this quarter.

Factors at Play

Copa Holdings’ third-quarter results might be hurt due to competition from the likes of GOL Linhas GOL and LATAM Airlines Group S.A. LTM in the Latin American aviation space.

Also, infrastructure challenges and regulatory issues as well as high taxes on international air travel pose a threat to the company’s results in the soon-to-be-reported quarter.

However, the improving economic scenario in Latin America might aid results in the quarter to be reported. We expect Copa Holdings’ third-quarter results to benefit from a strong demand for air travel. Traffic, measured in revenue passenger miles (RPMs) is expected to improve in the quarter. The Zacks Consensus Estimate for third-quarter RPM stands at 5,095 million, above the year-ago reported figure of 4,637 million.

The airline’s efforts to reward shareholders through dividend payments raise optimism for the stock. Notably, the company has paid a dividend of 75 cents per share in the third quarter, an increase from the previous payout of 51 cents.

Earnings Whispers

Per our proven model, a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise. However, that is not the case here as highlighted below.

Zacks ESP: Copa Holdings has an Earnings ESP of -0.78% as the Most Accurate estimate is pegged at $2.13 per share while the Zacks Consensus Estimate stands at $2.14. 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 of 3, which increases the predictive power of ESP. Further, combined with the company’s negative ESP, the case is left inconclusive.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Investors interested in the broader Transportation sector may consider Star Bulk Carriers Corp. SBLK as it possesses the right combination of elements to beat on earnings in its next release.

Based in Greece, Star Bulk Carriers Corp. is a leading global shipping company in the dry bulk sector. This Zacks #3 Ranked carrier has an Earnings ESP of +79.49% and is expected to report third-quarter results on Nov 20.

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