We have issued an updated research report on Spirit Airlines, Inc. SAVE on Aug 17.
Despite high fuel costs, shares of this low-cost carrier have fared well in a year's time. The stock has gained 22.3%, against the industry 's decline of 6.8%.
Reasons for the Robust Price Performance
Spirit Airlines has an impressive earnings history, surpassing the Zacks Consensus Estimate in each of the trailing four quarters. The average earnings beat is 2.9%.
Recently, this Miramar, FL-based company delivered earnings beat in the second quarter of 2018 results, which were announced in July. In the quarter under review, the top line improved around 21% year over year, primarily owing to 18.9% expansion in flight volumes. Moreover, unit costs (excluding fuel and special items) declined 11.3%. In fact, the company anticipates the metric to decline 3-4% in the third quarter. For 2018, the same is expected to fall 3.5-4%. During the quarter, passenger revenues improved 22.8% on the back of strong demand for air travel.
Moreover, unit revenues are expected to remain strong in the third quarter. Total revenue per available seat mile (TRASM) is expected to increase 2-3% despite increased average stage length and softness in Cancun.
We are also impressed by the carrier's efforts to modernize its fleet. During the quarter, Spirit Airlines announced the purchase of 14 A319 aircraft. Evidently, the low-cost carrier is constantly adding more efficient planes to its fleet and removing outdated ones.
Furthermore, we are positive about the company's efforts to reward shareholders through buybacks. The carrier bought back approximately $1.2 million shares during 2017. Additionally, the board authorized a share repurchase program worth up to $100 million in aggregate value, the date of expiration being Oct 25, 2018.
Other Favorable Factors
The stock is attractively valued. In terms of price-to-book (P/B) ratio, the stock is currently trading at 1.8 compared with the industry's reading of 2.8. The Value Score of A, currently held by the stock reflects attractive valuation. The company also has an impressive VGM Score of B. Here, V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three scores.
In the light of these positives, we believe that Spirit Airlines should be retained by investors for now. The Zacks Rank #3 (Hold) carried by the stock seems to suggest the same.
Stocks to Consider
A few better-ranked stocks in the broader Transportation Sector are Atlas Air Worldwide Holdings, Inc. AAWW , GATX Corporation GATX and SkyWest, Inc. SKYW . While GATX carries a Zacks Rank #2 (Buy), Atlas Air Worldwide and SkyWest sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Shares of Atlas Air Worldwide, GATX and SkyWest have gained 9.1%, 15.7% and 8.7% in the last six months, respectively.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report SkyWest, Inc. (SKYW): Free Stock Analysis Report GATX Corporation (GATX): Free Stock Analysis Report Atlas Air Worldwide Holdings (AAWW): Free Stock Analysis Report To read this article on Zacks.com click here.