Copa Holdings CPA is benefiting from robust financial stability and shareholder-friendly initiatives. The company’s fleet expansion efforts are encouraging. However, weak demand is significantly impacting CPA’s top line.

Factors Favoring CPA Stock

Copa Holdings demonstrates strong financial stability underpinned by solid liquidity and reduced operating costs.

The company’s proactive cost-cutting initiatives are commendable. In the fourth quarter of 2024, CPA’s operating expenses declined by 3.7% while increasing capacity by 7.2%. The 22.6% drop in the average price per fuel gallon significantly lowered fuel costs. Moreover, the company cut sales and distribution costs by 8.3%, driven by higher penetration of copa.com and lower-cost travel agency NDC channels, backed by NDC strategy. These efforts led to a 10.1% decrease in cost per available seat mile (CASM) to 8.7 cents, and a 2.6% drop in CASM excluding fuel, demonstrating the company’s ability to manage costs while growing passenger traffic by 6.7%.

CPA has a brief history of strong liquidity. In 2021, 2022 and 2023, its current ratio (a measure of liquidity) was pegged at 1.18, 1.04 and 0.94, respectively. The company ended the year 2024 with a current ratio of 1.11. A current ratio of greater than 1 is considered desirable as it indicates that the company has sufficient assets to meet its short-term obligations.

The company’s commitment to its shareholders is also encouraging. In 2024, Copa repurchased $87 million worth of shares under its ongoing $200 million share repurchase program authorized by its board of directors, representing approximately 2% of the company's total outstanding shares as of year-end 2024. Additionally, in February 2025, Copa's board of directors approved a quarterly dividend payment of $1.61 per share for 2025, which was paid on March 14, 2025, to its shareholders on record as of Feb. 28, 2025. By repurchasing shares and providing dividends, the company is reinforcing its commitment to maximizing shareholder value.

Moreover, in the fourth quarter, CPA took delivery of two Boeing 737 MAX 8 aircraft, ending the year with a consolidated fleet of 112 aircraft — 67 Boeing 737-800s, 32 Boeing 737 MAX 9s, nine Boeing 737-700s, three Boeing 737 MAX 8 and one Boeing 737-800 freighter. The company will add 13 Boeing 737 MAX 8 and one Boeing 737-800 freighter and expects to end 2025 with a fleet of 126 aircraft.

CPA: Key Risks to Watch

The downturn in demand is adversely impacting the company's prospects due to a weaker currency environment, increased regional industry capacity and the cancellation of Panama-Venezuela operations. These factors have led to a 10.8% drop in passenger yields and a 0.4 percentage point decrease in load factor, signaling weaker demand and lower passenger revenue  per available seat mile (PRASM). As a result, the company saw an 11.2% decline in PRASM and a 10.4% drop in RASM (Revenue per available seat miles), reflecting significant financial pressures. The rescheduling of flights has further disrupted revenues and hindered operational stability.

Copa Holdings is currently mired in the above headwinds, which have led to its unimpressive price performance. Its shares have plunged 20.2% over the past year compared with the industry’s 14.3% fall.

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CPA’s Zacks Rank

CPA currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Investors interested in the Transportation sector may also consider Air Transport Services Group ATSG and Expeditors International of Washington EXPD.

Air Transport Services Group currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ATSG has an expected earnings growth rate of 31% 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 beat of 6.1%.

Expeditors International of Washington carries a Zacks Rank of 2 at present.

The company has an encouraging track record regarding earnings surprise, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters and met once. The average surprise was 11.6%.

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This article originally published on Zacks Investment Research (zacks.com).

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