Investors in Copa Holdings, S.A. (NYSE:CPA) had a good week, as its shares rose 5.3% to close at US$110 following the release of its yearly results. It looks like a pretty bad result, all things considered. Although revenues of US$2.7b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 27% to hit US$5.81 per share. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on Copa Holdings after the latest results.
Taking into account the latest results, the current consensus from Copa Holdings’s 17 analysts is for revenues of US$2.83b in 2020, which would reflect an okay 4.6% increase on its sales over the past 12 months. Statutory earnings per share are expected to soar 69% to US$9.83. In the lead-up to this report, analysts had been modelling revenues of US$2.87b and earnings per share (EPS) of US$9.34 in 2020. So the consensus seems to have become somewhat more optimistic on Copa Holdings’s earnings potential following these results.
The consensus price target was unchanged at US$127, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Copa Holdings analyst has a price target of US$145 per share, while the most pessimistic values it at US$102. As you can see, analysts are not all in agreement on the stock’s future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Copa Holdings’s past performance and to peers in the same market. It’s clear from the latest estimates that Copa Holdings’s rate of growth is expected to accelerate meaningfully, with forecast 4.6% revenue growth noticeably faster than its historical growth of 2.8%p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 4.8% per year. Copa Holdings is expected to grow at about the same rate as its market, so it’s not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Copa Holdings following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. The consensus price target held steady at US$127, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple Copa Holdings analysts – going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Copa Holdings’s balance sheet, and whether we think Copa Holdings is carrying too much debt, for free on our platform here.
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