Yahoo Finance Spirit Airlines, Inc. (NYSE:SAVE) Analysts Just Cut Their EPS Forecasts Substantially
The analysts covering Spirit Airlines, Inc. (NYSE:SAVE) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the latest downgrade, the ten analysts covering Spirit Airlines provided consensus estimates of US$1.9b revenue in 2020, which would reflect a stressful 49% decline on its sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$6.65 per share in 2020. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$2.4b and losses of US$2.88 per share in 2020. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
Check out our latest analysis for Spirit Airlines
The consensus price target fell 20% to US$15.92, implicitly signalling that lower earnings per share are a leading indicator for Spirit Airlines' valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Spirit Airlines analyst has a price target of US$30.00 per share, while the most pessimistic values it at US$8.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 49% revenue decline a notable change from historical growth of 14% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 21% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Spirit Airlines is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Spirit Airlines' revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Spirit Airlines.
That said, the analysts might have good reason to be negative on Spirit Airlines, given dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other concerns we've identified.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
