What happened
Copa(NYSE: CPA) reported better-than-expected quarterly results on strong travel demand and stringent cost controls. Investors are excited to go along for the ride, sending Copa shares up as much as 16% for the week, according to data provided by S&P Global Market Intelligence.
So what
Panamanian airline Copa is benefiting from a surge in demand for travel. The company earned $3.99 per share in the first quarter on revenue of $867.3 million, topping Wall Street expectations for $3.40 per share in earnings on sales of $838 million.
Copa's operating profit for the quarter was $193.2 million, generating a 22.3% operating margin. That's compared to a $112.9 million profit at a margin of 16.8% in the first quarter of 2019, prior to the pandemic. Passenger traffic was up 7.1% compared to the 2019 quarter, while total revenue was up 29%.
While the demand side of the equation was likely no surprise to investors, the profitability was a big boost. Management is expecting full-year EBIT margin to come in between 22% and 24%, a healthy margin for the airline industry.
Now what
Copa is in expansion mode, planning to add new service to Ecuador as well as two new U.S. cities this summer. The company's Panama City hub is an ideal connecting point for travel through the Americas, and Copa as of this summer will fly to 80 destinations in 32 countries.
There are reasons for investors to watch closely. An economic slowdown could eat into international travel, and slow growth in Latin America. But for now there is no sign of that slowdown materializing, and Copa is set up well to benefit from the continued strong demand for flights.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Copa. The Motley Fool has a disclosure policy.
