Why Is Spirit (SAVE) Down 8.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Spirit (SAVE). Shares have lost about 8.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Spirit due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Spirit Airlines' Q1 Earnings in-Line, Rise Y/Y
Spirit Airlines’ 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. 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.
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.
Spirit Airlines 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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -19.68% due to these changes.
Currently, Spirit has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Spirit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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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.