Copa Holdings’ CPA top line benefits from the increased air-travel demand. The company’s proactive measures to expand its fleet are praiseworthy. However, CPA’s financial stability, challenged by escalated operating expenses, is hurting the company’s bottom line.

Factors Favoring CPA Stock

CPA’s top line is bolstered by upbeat air-travel demand. To match this increased demand scenario, CPA has increased its capacity. In August, available seat miles (a measure of capacity) increased 8.2% year over year. Revenue passenger miles increased 5.8%.

The company’s efforts to expand its fleet are commendable. In July 2024, CPA took delivery of its first Boeing 737 MAX 8, increasing its total fleet to 110 aircraft. By the end of the second quarter, the consolidated fleet included 67 Boeing 737-800s, 32 Boeing 737 MAX 9s, 9 Boeing 737-700s and 1 Boeing 737-800 freighter. Such moves reflect the company’s continued commitment to growth and modernization.

Copa Holdings’ commitment to reward its shareholders through dividends is noteworthy. The company will make its third dividend payment of the year of $1.61 per share on Sept. 13, 2024, to all Class A and Class B shareholders on record as of Aug. 30, 2024. These initiatives not only bolster investors’ confidence but also positively impact earnings per share.

Copa Holdings: Key Risks to Watch

The surge in operating expenses is adversely impacting the company’s bottom line, due to rising fuel and labor costs. In the second quarter of 2024, operating costs increased by 7.4% year over year.

In the second quarter of 2024, the fuel expenses accounting for 37.3% of the total operating expenses increased by 15% year over year, due to a 5.2% higher effective fuel price and a 9.6% increase in fuel gallons consumed. The labor costs comprising wages, salaries, benefits and other employees' expenses increased by 8.6% year over year.

Copa Holdings is currently mired in multiple headwinds, which have led to its unimpressive price performance. Shares of CPA have plunged 13.9% over the past year against 24.8% growth in its industry.

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CPA’s Zacks Rank and Stocks to Consider

CPA is currently carrying a Zacks Rank #3 (Hold).

Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide CHRW and Westinghouse Air Brake Technologies WAB.

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 has an expected earnings growth rate of 25.2% 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 once, delivering an average surprise of 7.3%. Shares of CHRW have risen 21.7% in the past year.

WAB carries a Zacks Rank #2 (Buy) at present and has an expected earnings growth rate of 26% for the current year.

The company has an encouraging track record concerning the earnings surprise surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once. The average beat is 11.8%. Shares of WAB have climbed 66.8% in the past year.

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