A month has gone by since the last earnings report for Spirit (SAVE). Shares have added about 0.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Spirit due for a pullback? 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 Posts Q3 Earnings Beat
Quarterly earnings were 3 cents per share in contrast to the Zacks Consensus Estimate of a loss of 9 cents and the year-ago quarter’s loss of 69 cents. Revenues of $1,343.2 million missed the Zacks Consensus Estimate of $1352.6 million but improved 46% year over year on the back of improving air-travel demand and increased flight volume and higher operating yields.
In third-quarter 2022, passenger revenues, which accounted for the bulk of the top line (98.4%), increased 45.7% year over year to $1,322.08 million. Other revenues increased 37% year over year to $21.1 million.
All comparisons (in %) are presented below on a year-over-year basis.
Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) at Spirit rose 17.8% in the reported quarter. To cater to this increased demand, capacity (measured in available seat miles) expanded to 9.7%. The load factor increased 5.7 points to 83.3% in the third quarter of 2022. Total operating revenue per available seat miles (TRASM) jumped 32.7% to 11.07 cents in the reported quarter. The average yield increased 23.6% to 13.29 cents.
Adjusted operating expenses (excluding fuel) escalated 56% to $1,331.8 million. The average fuel cost per gallon in the reported quarter rose to $3.82, up 78.5% year over year. Fuel gallons consumed skyrocketed 9.9% to $133.14 million, reflecting the usage of more planes to cater to upbeat air-travel demand. Adjusted cost per available seat miles (CASM), excluding fuel, increased 2.3% in the reported quarter.
Spirit took the delivery of four new A320 neo aircraft during the reported quarter. The total number of aircraft in its fleet at the end of the reported quarter was 184, up 35.3% from third-quarter 2019.
The company exited the reported quarter with unrestricted cash, cash equivalents and short-term investments, and the liquidity available under the carrier’s revolving credit facility of $1.3 billion. Capital expenditures for the quarter were $190.4 million, primarily related to the purchase of spare parts.
SAVE expects adjusted operating expenses for the fourth quarter in the range of $1,365-$1,375 million. The adjusted operating margin is expected to be in the range of 1-3%. Fuel gallons consumed are expected to be $141.6 million in the fourth quarter. The fuel price per gallon is anticipated to be $3.55. The effective tax rate is expected to be 21%. Available seat miles are anticipated to increase roughly 24.5% from fourth-quarter 2019 actuals.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 235% due to these changes.
At this time, Spirit has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Spirit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Spirit is part of the Zacks Transportation - Airline industry. Over the past month, Hawaiian Holdings (HA), a stock from the same industry, has gained 0.6%. The company reported its results for the quarter ended September 2022 more than a month ago.
Hawaiian Holdings reported revenues of $741.15 million in the last reported quarter, representing a year-over-year change of +45.7%. EPS of -$0.15 for the same period compares with -$0.95 a year ago.
For the current quarter, Hawaiian Holdings is expected to post a loss of $0.61 per share, indicating a change of +55.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -171.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Hawaiian Holdings. Also, the stock has a VGM Score of D.
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