Chorus Aviation’s stock looks ready to break out, this investor says

Lower than expected quarterly numbers from regional airline Chorus Aviation (Chorus Aviation Stock Quote, Chart TSX:CHR) may have the stock trading lower on Wednesday, but chart-watchers should still be keeping tabs on the stock, says technical analyst Hap Sneddon of Castlemoore, who see breakout potential on the horizon.

Halifax-based Chorus released its first quarter fiscal 2019 results on Wednesday, reporting a profit of $33.4 million, a huge 542-per-cent upgrade from a year ago, on operating revenue of $343.9 million, itself up from $323.7 million a year prior. Chorus earned $19 million on an adjusted basis or $0.13 per share, whereas analysts were estimating $0.16 per share and a top line of $345 million.

President and CEO Joe Randell said that the quarter met his expectations while touting the company’s growth and diversification strategy which has led to growth in its third-party leasing portfolio by 11 aircraft.

“Our strengthened partnership with Air Canada was a pivotal development in our transformation, securing Jazz’s place in the Air Canada Express network for an unprecedented 17 years to the end of 2035. The implementation of the amended CPA is progressing well, and we expect Jazz’s fleet modernization to commence with the delivery of five CRJ900s, leased from Air Canada, beginning in June,” said Randell, in a press release.

Chorus’ share price has fallen significantly over the past year and a half. In mid-January, 2018, the stock was priced as high as $9.86 but by late December had plummeted to the low-$5.00 range. The stock picked itself up in January on the back of news that it had firmed up a long-term agreement with Air Canada but has been trading sideways since February and is currently in the low-$7.00 range.

Sneddon says that Chorus’ chart is looking good, however, with a chance to make up some of that lost ground if and when the stock can get over the $8.00 level.

“This is a pretty positive pattern. This would be a reverse head-and-shoulders,” says Sneddon, founder and chief portfolio manager at Castlemoore, to BNN Bloomberg on Monday.

“On a shorter-term basis, we did have that breakout and it hasn’t been that long — it’s been about a month, which has been pretty positive, as it has broken out from the shorter-term levels [at $7.00],” he says. “So, the first thing you’ll want to see is for it to get above $8.00 and then you’ll probably see the longer-term go.”

Sneddon says, “Because it’s in industrials, this would be a name that could go quiet for the summer. But as soon as you get above eight bucks, it’s probably going to start moving.”