Shares of Spirit Airlines, Inc.SAVE declined 5.9% on Apr 26 to close the trading session at $35.40. In fact, the stock was down despite this low-cost carrier posting better-than-expected earnings per share yesterday. Spirit's first-quarter earnings per share came in at 44 cents (excluding $1.10 from non-recurring items), a penny ahead of the Zacks Consensus Estimate.
Why This Contrasting Scenario
Despite an earnings beat in the first quarter, investors were visibly displeased due to a year-over-year decline in the metric. High fuel costs were primarily responsible for the bottom-line contraction. Average economic fuel cost per gallon surged 21.5% to $2.15 in the reported quarter.
The upsurge in fuel costs was chiefly responsible for a 39.8% increase in total operating expenses. This apart, expenses on salaries, wages and other benefits surged 22%. Unit costs (excluding fuel and special items) decreased 5%. However, the decline was more than the anticipated figure of 3% due to the new contract with its pilots.
This Miramar, FL-based carrier's struggles on the top-line front also disappointed investors. The carrier recorded revenues of $704.1 million, missing the Zacks Consensus Estimate of $705 million. The top line, however, grew substantially year over year owing to healthy passenger revenues.
Notably, the most disturbing aspect of this Zacks Rank #3 (Hold) carrier's first-quarter top-line performance was the 2.4% decline in total revenue per available seat miles (a key measure of unit revenue). This key metric was hurt by the 1.7% decrease in operating yields and a 4.1% increase in average stage length. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Load factor (% of seats filled by passengers) decline of 60 basis points to 81% was another negative aspect of the earnings report. The metric was down as traffic growth (21.4%) was outpaced by capacity expansion (22.3%) during the reported quarter.
Spirit Airlines, Inc. Price, Consensus and EPS Surprise
Spirit Airlines, Inc. Price, Consensus and EPS Surprise | Spirit Airlines, Inc. Quote
Apart from the below-par earnings report, Spirit Airlines' second-quarter 2018 guidance also disappointed investors and contributed to the stock price decline. The company envisions capacity (available seat miles) to expand 29% year over year in the quarter. TRASM is expected to decline in the range of 6.5-7.5%.
Fuel costs are anticipated to increase further to $2.23 per gallon in the second quarter. Adjusted unit costs ex-fuel is estimated to be down 7.5-8.5%. For 2018, the carrier expects capacity to rise 22.5%. Adjusted CASM ex-fuel is predicted to be down 3-4% in the year.
Investors interested in the broader Zacks Transportation industry are keenly awaiting first-quarter earnings reports from key players like C.H. Robinson Worldwide, Inc. CHRW , Expeditors International of Washington, Inc. EXPD and Copa Holdings, S.A. CPA in the coming days. While C.H. Robinson Worldwide is scheduled to report on May 1, Expeditors and Copa Holdings are scheduled to do the same on May 8 and May 9, 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 reportCopa Holdings, S.A. (CPA): Free Stock Analysis ReportSpirit Airlines, Inc. (SAVE): Free Stock Analysis ReportC.H. Robinson Worldwide, Inc. (CHRW): Free Stock Analysis ReportExpeditors International of Washington, Inc. (EXPD): Free Stock Analysis ReportTo read this article on Zacks.com click here.