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Spirit Airlines' (SAVE) Q4 Earnings: What's in the Cards?

Zacks Equity Research

Spirit Airlines SAVE is expected to release its fourth-quarter 2018 earnings numbers on Feb 6.

In the third quarter of 2018, the company delivered a positive earnings surprise of 5.8%. Moreover, the company has an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 3.2%.

Let’s delve deep to unearth the factors likely to influence its fourth-quarter results.

In the quarter to be reported, we expect Spirit Airlines to perform well on the unit revenue front. The carrier expects fourth-quarter total revenue per available seat miles (TRASM: a key measure of unit revenues) to increase approximately 11.4% year over year. Strong yields during the peak season is anticipated to provide a boost to this key metric.

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With the Thanksgiving holiday period and the winter travel season falling in the fourth quarter, it is widely expected that traffic in the three-month period would be high. The Zacks Consensus Estimate for fourth-quarter revenue passenger miles (a measure of air traffic) is pegged at 7,284 million, reflecting a year-over-year increase of 15.3%. Favorable pricing of non-ticket items like seats and bags is also expected to support fourth-quarter results.

However, woes related to capacity overexpansion might hurt the fourth-quarter results. The Zacks Consensus Estimate for fourth-quarter available seat miles (a measure of capacity) is pinned at 8,902 million, mirroring a 15% increase year over year. Furthermore, the carrier expects a greater increase (i.e. 16.2%) in capacity in the soon-to-be-reported quarter. The consensus estimate for fourth-quarter load factor (% of seats filled by passengers) is pegged at 82%, lower than the 86% reported in the third quarter of 2018.

Non-fuel unit costs are also expected to be high in the quarter to be reported, thereby limiting bottom-line growth. Spirit Airlines expects non-fuel unit costs (adjusted) to increase 5.5% on a year-over-year basis. The Zacks Consensus Estimate for fourth-quarter non-fuel unit costs reflect a 5% increase year over year. For fourth-quarter economic fuel costs per gallon, the consensus mark stands at $2.51, higher than the $2.36 registered in the third quarter of 2018.

Spirit Airlines, Inc. Price and EPS Surprise

 

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

Earnings Whispers

Our proven model does not conclusively show that Spirit Airlines is likely to beat estimates this earnings season. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. But that is not the case here as elaborated below.

Earnings ESP: Spirit Airlines has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate is pegged at $1.39, in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Spirit Airlines carries a Zacks Rank #2, which increases the predictive power of ESP. However, a company needs to have a positive ESP as well to be confident of a likely earnings surprise. This combination leaves surprise prediction inconclusive.

Other Stocks to Consider

Investors interested in the broader Transportation sector may consider Expeditors International of Washington EXPD, Old Dominion Freight Line ODFL and Copa Holdings CPA as these possess the perfect mix of elements to beat on earnings this reporting cycle.

Expeditors has an Earnings ESP of +0.39% and a Zacks Rank #1. The company will release fourth-quarter 2018 results on Feb 19. You can see the complete list of today’s Zacks #1 Rank stocks here.

Old Dominion Freight Line has an Earnings ESP of +1.85% and a Zacks Rank #3. The company will release fourth-quarter 2018 results on Feb 7.

Copa Holdings has an Earnings ESP of +5.94% and a Zacks Rank of 2. The company will release fourth-quarter 2018 results on Feb 13.

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Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
 
Expeditors International of Washington, Inc. (EXPD) : Free Stock Analysis Report
 
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Zacks Investment Research