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Spirit's (SAVE) Q1 Earnings Meet, CASM View Weak, Stock Down


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Spirit Airlines' SAVE first-quarter 2019 earnings per share (excluding 2 cents from non-recurring items) of 84 cents came in line with the Zacks Consensus Estimate. Meanwhile, the bottom line improved significantly on a year-over-year basis mainly owing to low fuel costs.

However, this ultra-low-cost carrier issued a disappointing view with respect to cost per available seat mile (CASM), excluding fuel (non-fuel unit costs), for the second quarter. Consequently, the stock declined more than 5% in after-hours trading on Apr 24.

In the quarter under review, non-fuel unit costs increased 2.4% year over year and is projected to rise 4.6% in the April-June period. Notably, the construction work scheduled at the Ft. Lauderdale airport during 2019's summer and a severe storm on Apr 19 were the primary reasons behind the bearish projection.

The storm, which forced the carrier to cancel 318 flights over the Easter weekend, is also expected to negatively impact second-quarter total revenue per available seat mile (TRASM) to the tune of approximately 50 basis points. TRASM, which increased 4.1% in the reported quarter, is projected to rise approximately 5% in the second quarter despite the impact of the storm.

Spirit Airlines, Inc. Price, Consensus and EPS Surprise

Spirit Airlines, Inc. Price, Consensus and EPS Surprise | Spirit Airlines, Inc. Quote

Meanwhile, operating revenues of $855.8 million in the first quarter marginally missed the Zacks Consensus Estimate of $856.1 million. However, the top line improved 21.5% year over year on the back of a 16% rise in flight volume and favorable passenger yields, and load factor (% of seats filled by passengers). Passenger revenues, accounting for bulk (97.9%) of the top line, jumped 21.6% year over year.

While total revenue passenger miles (RPMs) registered a 19.4% improvement in the reported quarter, available seat miles (ASMs) expanded 16.9% year over year. As a result, the load factor climbed 170 basis points to 82.7% as traffic growth outweighed capacity expansion.

Total operating expenses increased 3.4% million, primarily due to a 31.5% rise in salaries, wages and benefits. However, the rise in operating expenses was much less than the 26.4% increase registered in the fourth quarter of 2018. Average economic fuel cost per gallon in the reported quarter declined 2.8% year over year to $2.09.

Outlook

Spirit Airlines, carrying a Zacks Rank #3 (Hold), anticipates capacity growth of approximately 13% year over year in the second quarter of 2019. Economic fuel cost is projected to be $2.25 per gallon. Moreover, an effective tax rate of 24% is envisioned during the same time frame. You can see  the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

For 2019, the company expects non-fuel unit costs to increase in the 2-3% range year over year. Capacity is anticipated to climb nearly 15% in the current year. Effective tax rate in the year is estimated to be 24%. Additionally, capital expenditures are projected to be $498 million.

Upcoming Releases

Investors interested in the Zacks  Airline  industry are keenly awaiting first-quarter 2019 earnings reports from key players like American Airlines AAL , GOL Linhas GOL and Azul AZUL on Apr 26, Apr 30 and May 9, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: SAVE , AAL , GOL , AZUL



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