The airline market has emerged resilient over the years and is poised for significant growth owing to the growing demand for air travel and incorporation of new innovative ideas to strengthen the market. Given this backdrop, we evaluate the outlook for airline stocks Copa Holdings, SA (CPA), Corporación América Airports SA (CAAP), and Cathay Pacific Airways (CPCAY) to determine the best investment opportunity in this space for now. Continue reading….
With more and more people and goods taking to the skies, along with technological advancements, the outlook for the airline industry is promising. Given the industry tailwinds, investors may want to consider buying shares of Airlines Corporación América Airports SA (CAAP) and Cathay Pacific Airways Limited (CPCAY), positioned for potential gains, while it would be wise to keep an eye on Copa Holdings, SA (CPA) Now.
According to the International Air Transport Association (IATA), global passenger demand for February 2024, calculated in passenger-kilometres (RPK), grew by 21.5% year-on-year, while total capacity measured in available seat-kilometres (ASK) increased by 18.7% year-on-year.
THE total air cargo demandmeasured in cargo tonne-kilometers (CTK), it increased 11.9% from February 2023 levels, marking the third consecutive month of double-digit year-over-year demand growth.
The airline industry is expected to show extraordinary growth this year and is expected to see further growth in 2025. IATA expects total revenues to grow 7.6% year-on-year. 964 billion dollars in 2024.
The industry is inventing new innovative technologiessuch as using global weather data, historical data on flight operations and more, with the help of artificial intelligence (AI) algorithms to avoid flight delays and cancellations, improve customer experience, efficiency of employees and help reduce costs.
The US aviation market is estimated to grow to CAGR of 4.5%reaching $105 billion by 2030.
In light of these encouraging trends, let’s take a look at the fundamentals of the three Airline companies stocks, starting with the weakest ones from an investment point of view.
Action no. 3: Copa Holdings, S.A. (CPA)
Headquartered in Panama City, Panama, CPA provides air services for passengers and cargo. The Company operates in the air transport segment. It offers approximately 327 daily scheduled flights to 78 destinations in 32 countries in North, Central and South America, as well as the Caribbean from its hub in Panama City.
On April 11, CPA announced March 2024 data in which CPA capacity (ASM) increased by 12.3%, while system-wide passenger traffic (RPM) also increased by 11.5% every year.
On March 15, CPA paid its shareholders its first quarterly dividend of $1.61 per share. Its annualized dividend rate of $6.44 per share translates to a dividend yield of 6.69% on the current share price. Its four-year average return is 1.32%. Over the past five years, CPA’s dividend payments have grown at a CAGR of 8.5%.
CPA’s trailing 12-month EBITDA and leveraged FCF margins of 32.29% and 21.53% are 135.8% and 225.7% higher than industry averages of 13.69% and 6.61%, respectively. However, the actions asset turnover ratio of 0.70x is 11.4% lower than the industry average of 0.79x.
Over the past three and five years, its revenues have grown at a CAGR of 62.9% and 5.3%, respectively, while its total assets have grown at a CAGR of 10.5% and 3.2% over the same periods .
During the fiscal fourth quarter ended December 31, 2023, CPA’s total operating revenues and total operating expenses increased 3% and 4% year over year, to $916.93 million and $698.06 million, respectively .
For the same quarter, the company’s adjusted net income increased 6% from the prior-year quarter, while adjusted basic earnings per share decreased marginally from the prior-year quarter to $4.47.
Street expects CPA revenue for the fiscal year ending December 2024 to increase 7.6% year-over-year to $3.72 billion. The company’s EPS is expected to decline 1.6% year-over-year to $16.52 for the same period. The company has surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has declined 14.8% over the past nine months, but gained 14.2% over the past six months to close the latest trading session at $96.25.
The CPA’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, equivalent to Neutral in our proprietary rating system. POWR Ratings are calculated by considering 118 distinct factors, each optimally weighted.
The stock has a grade of C for growth, value, momentum and stability. Inside the Airline companies sector, is in 10th place out of 26 titles.
To view additional POWR Ratings for Sentiment and Quality by CPA, Click here.
Action no. 2: Corporación América Airports SA (CAAP)
Headquartered in Luxembourg City, Luxembourg, CAAP acquires, develops and manages airport concessions. It operates 52 airports in Latin America, Europe and Eurasia.
On March 19, CAAP reported a 5.4% year-over-year increase in passenger traffic in February 2024, reaching 92.80% of February 2019 levels. Additionally, it reported that its international passenger traffic is 4% higher .2% to pre-pandemic levels.
CAAP’s trailing 12-month cash from operations of $356.42 million is 18.4% higher than the industry average of $300.97 million. Its trailing 12-month EBITDA and leveraged FCF margins of 40.33% and 16.67% are 194.6% and 152.3% higher than industry averages of 13.69% and 6. 61%, respectively.
Over the past three and five years, its EBITDA has grown at a CAGR of 123.8% and 3.4%, respectively, while its net profit has grown at a CAGR of 102% over the past five years.
For the fiscal fourth quarter ended December 31, 2023, CAAP’s revenue was $365.04 million, while gross profit increased 6.4% year-over-year to $115.38 million. Additionally, its adjusted EBITDA stood at 303.40 million, up 146.6% from the same quarter last year.
For the same quarter, earnings for the period attributable to parent company owners and EPS were $130.75 million and $0.81, up 977.2% and 976.7%, respectively. to the quarter of the previous year.
Street expects CAAP’s revenue for the fiscal year ending December 2024 to increase 13.5% year-over-year to $1.59 billion. Its EPS is expected to be $1.18 for the same period. The company has surpassed consensus EPS estimates in three of the trailing four quarters.
The stock gained 59.6% over the past year to close the latest trading session at $16.45. In the last six months it has gained 36%.
CAAP’s POWR ratings reflect this promising outlook. It has an overall rating of B, which translates to Buy in our proprietary rating system.
CAAP is rated A for Sentiment and B for Momentum and Quality. In the same sector it is in 2nd place.
For other CAAP ratings (growth, value and stability), Click here.
Stock no. 1: Cathay Pacific Airways Limited (CPCAY)
Headquartered in Lantau Island, Hong Kong, CPCAY offers international passenger and air cargo transportation services. The company operates through its four operating segments: Cathay Pacific and Cathay Dragon; Hong Kong plane; Hong Kong Express; and air services.
On March 21, February 2024 CPCAY data showed strong travel demand throughout the month, particularly during the Chinese New Year holiday period. On February 18, CPCAY reached a significant milestone by carrying more than 70,000 passengers and operating 272 passenger flight segments, the most in a single day since the start of the pandemic. CPCAY carried 1,801,174 passengers in February 2024, an increase of 61.6% year-on-year.
On March 13, CPCAY announced the distribution of an interim dividend for the year ended December 31, 2023, of HKD0.43 per share, payable to shareholders on May 2. Its annualized dividend rate of $0.55 per share translates to a dividend yield of 10.72. % of the current share price. Its four-year average return is 0.28%. Over the past five years, CPCAY’s dividend payments have grown at a CAGR of 23.5%.
CPCAY’s cash from operations over the trailing 12 months of $3.38 billion is significantly higher than the industry average of $300.97 million. Its trailing 12-month EBITDA and leveraged FCF margins of 21.66% and 20.86% are 58.2% and 215.6% higher than industry averages of 13.69% and 6, 61%, respectively.
Over the past three years, its revenue has grown at a CAGR of 26.3%, while its net profit has grown at a CAGR of 33.1% over the past five years.
For the fiscal year ended December 31, 2023, CPCAY’s total revenue and operating profit were $12.11 billion and $1.94 billion, up 85.1% and $1.94 billion, respectively. 335.7% on an annual basis.
For the same year, underlying profit attributable to CPCAY shareholders and earnings per ordinary share were $982 million and 16.10 cents, compared to underlying loss attributable to CPCAY shareholders and earnings per ordinary share of 849 million dollars and 14.40 cents from the previous year. , respectively.
Street expects CPCAY revenue for the fiscal year ending December 2024 to increase 18.6% year-over-year to $14.32 billion.
The stock gained 5.5% over the past six months to close the latest trading session at $5.13. Over the last year it has gained 4.2%.
CPCAY’s strong outlook is reflected in its POWR Ratings. The stock has an overall rating of A, equivalent to Strong Buy in our proprietary rating system.
CPCAY has an A grade for quality and a B for growth, value and stability. It ranks first in the same industry.
Click here for additional POWR ratings for CPCAY (Momentum and Sentiment).
What to do next?
Get your hands on this special report featuring 3 low-priced companies with huge upside potential even in today’s volatile markets:
3 stocks that will double this year >
CPCAY shares were unchanged in premarket trading Tuesday. Year to date, CPCAY has gained 3.47%, compared to a 6.46% gain in the benchmark S&P 500 index over the same period.
About the author: Neha Panjwani
Since her school days, Neha had a deep fascination for finance, a passion that pushed her towards a career as an investment analyst after completing her bachelor’s degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her understanding of investment fundamentals. Neha’s primary focus is to help retail investors identify optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a focus on stocks and ETFs. She is committed to empowering people to make informed, strategic investment decisions in the dynamic world of finance.
Moreover…
The mail Top 3 Airline Stocks Positioned for Potential Gains: Buy or Hold? appeared first StockNews.com