Spirit Airlines Shares Down 41.8% Since March: Here's Why

Spirit Airlines, Inc.‘s SAVE shares have shed 41.8% of value since March compared with the industry’s 24.6% decline.


Reasons for Dismal Performance

Like other airlines, Spirit Airlines is reeling under the effects of the coronavirus pandemic. The demand scenario, which started deteriorating in late January, began to worsen in mid-March.

Due to declining passenger revenues (down 51.7% in first-half 2020), the carrier reported wider-than-expected loss in each of the two quarters of 2020. With traffic plunge outpacing the capacity reduction, load factor (percentage of seats filled by passengers) tanked 14.4 percentage points during the first half of 2020.

Due to an unprecedented drop in passenger demand, the company’s April and May capacity was lowered by approximately 75% and 95%, respectively. The same for June fell approximately 95%. For the third quarter, capacity is expected to drop approximately 32% year over year.

Notably, due to capacity cuts, unit costs are increasing substantially. Evidently, in second quarter 2020, cost per available seat mile (CASM) excluding operating special items and fuel, escalated more than 100%.

Unfavorable Estimate Revisions

Thanks to deteriorating demand and uncertain economic conditions ahead, the Zacks Consensus Estimate for current-year bottom line has widened to a loss of $8.55 from a loss of $7.44 in the past 60 days.

Zacks Rank & Stocks to Consider

Spirit Airlines currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the Zacks Transportation sector are Knight-Swift Transportation Holdings KNX, United Parcel Service, Inc. UPS and Werner Enterprises WERN. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for Knight-Swift, UPS and Werner is pegged at 15%, 7.7% and 8.5%, respectively.

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United Parcel Service, Inc. (UPS): Free Stock Analysis Report
KnightSwift Transportation Holdings Inc. (KNX): Free Stock Analysis Report
Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report
Werner Enterprises, Inc. (WERN): Free Stock Analysis Report
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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.

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