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Why Is Spirit (SAVE) Up 2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Spirit (SAVE). Shares have added about 2% in that time frame, outperforming 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 drivers.

Spirit Airlines Incurs Wider Than Expected Loss in Q1

Spirit Airlines’ loss (excluding 19 cents from non-recurring items) of $1.60 per share was wider than the Zacks Consensus Estimate of a loss of $1.54 but narrower than the year-ago quarter’s loss of $2.48. In first-quarter 2019 (pre-coronavirus era), the carrier had reported earnings of 84 cents per share.

In first-quarter 2022, operating revenues of $967.3 million increased in excess of 100% year over year. The upside reflects improving air-travel demand. Revenues were also higher than the Zacks Consensus Estimate of $951.3 million. In first-quarter 2022, passenger revenues, which accounted for the bulk of the top line (98.2%), increased 110.9% year over year (when the impact of coronavirus on air-travel demand was severe) to $949.7 million. Passenger revenues were up 13.3% from the first-quarter 2019 actuals. Other revenues surged 60.6% year over year to $17.57 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 soared 57.5% in the reported quarter. To cater to this increased demand, capacity (measured in available seat miles) expanded to 46.9%. Load factor increased 5.1 points to 77.2% in the first quarter of 2022. Total operating revenue per available seat miles (TRASM) jumped 42.7% to 8.25 cents in the reported quarter. The average yield surged 33.1% to 10.69 cents.

Adjusted operating expenses (excluding fuel) escalated 34.5% to $751.1 million. Average fuel cost per gallon in the reported quarter rose to $2.41 from $1.32 as oil prices shot up. Fuel gallons consumed skyrocketed 57.6% to $123.3 million, reflecting the usage of more planes to cater to upbeat air-travel demand. Adjusted cost per available seat miles (CASM) excluding fuel decreased 10.5% in the reported quarter, reflecting the expanded capacity. Spirit took the delivery of three new A320neo aircraft during first-quarter 2022. The total number of aircraft in its fleet at the end of the quarter was 176. SAVE expects to end 2022 with 197 planes in its fleet. It exited the quarter with unrestricted cash, cash equivalents and short-term investments, and the liquidity available under the carrier’s revolving credit facility of $1.6 billion. Capital expenditures for the quarter were $53.2 million, primarily related to the purchase of spare parts.

SAVE expected adjusted operating expenses for the June quarter in the range of $1,335-$1,365 million. Adjusted pre-tax margin is expected in the -3 to -5% range. Fuel gallons consumed are expected to be $130.7 million in the second quarter. Fuel price per gallon is anticipated in the $3.85-$3.90 range. Effective tax rate is expected to be 21%. Available seat miles are anticipated to increase roughly 10.5% from second-quarter 2019 actuals.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -7.39% due to these changes.

VGM Scores

Currently, Spirit has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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.

Performance of an Industry Player

Spirit is part of the Zacks Transportation - Airline industry. Over the past month, Gol Linhas Aereas Inteligentes S.A. (GOL), a stock from the same industry, has gained 6.6%. The company reported its results for the quarter ended March 2022 more than a month ago.

Gol Linhas Aereas Inteligentes S.A. reported revenues of $616.19 million in the last reported quarter, representing a year-over-year change of +114.9%. EPS of -$0.63 for the same period compares with -$0.89 a year ago.

For the current quarter, Gol Linhas Aereas Inteligentes S.A. is expected to post a loss of $0.33 per share, indicating a change of +71.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +9.7% over the last 30 days.

Gol Linhas Aereas Inteligentes S.A. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.


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