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Solid Cash Balance Aids Spirit (SAVE), Rising Fuel Costs Hurt

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·3 min read
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  • SAVE
  • CHRW
  • KNX
  • LSTR

We have recently updated a report on Spirit Airlines, Inc. SAVE.

With acceleration in leisure demand for air travel, Spirit Airlines’ top line increased more than 100% year over year in the September quarter. The massive year-over-year jump reflects improving air-travel demand as COVID-19 cases fall and the threat of the Delta variant recedes in the United States. Revenues increased 7.4% sequentially.  To meet the increasing demand, the carrier is expanding capacity and expects fourth-quarter 2021 capacity to increase 11.2% from the levels achieved in fourth-quarter 2019.

The carrier exited third-quarter 2021 with cash and cash equivalents of $1,695 million, above the current debt of $208 million, implying that the company has sufficient cash to meet its current debt obligations. The company exited the September quarter with a current ratio (a measure of liquidity) of 1.56, which compared favorably with the June quarter's reading of 1.49.

The current scenario of rising fuel costs does not bode well for the airline and is hurting the bottom line. In the September quarter, the average fuel cost per gallon rose to $2.14 from $1.27 as oil price shot up. Fuel gallons consumed skyrocketed 63.2% to $121.1 million, reflecting the usage of more planes to cater to upbeat air-travel demand.   Fuel price per gallon is projected to increase further to $2.54 per gallon in fourth-quarter 2021.

Zacks Rank & Stocks to Consider

Spirit Airlines currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. KNX, Landstar System, Inc. LSTR and C.H. Robinson Worldwide, Inc. CHRW.

The long-term expected earnings per share (three to five years) growth rate for Knight-Swift is pegged at 15%. KNX is benefitting from an improvement in the adjusted operating ratio. The adjusted operating ratio improved to 82.8% in the first nine months of 2021 compared with 86.6% reported in the first nine months of 2020. In third-quarter 2021, the metric improved to 81.3% from 83.9% a year ago.  

This uptick in adjusted operating ratios is primarily driven by higher revenues in the Trucking, Logistics and Intermodal segments. Lower the value of the metric, the better. KNX has surged 38% in the past year. Knight-Swift sports a Zacks Rank #1.

The long-term expected earnings per share (three to five years) growth rate for Landstar is pegged at 12%. LSTR is benefitting from a gradual recovery in the economy and freight market conditions in the United States.

LSTR’s top and the bottom line increased substantially in each quarter from third-quarter 2020, owing to robust revenues in the primary segment — truck transportation. LSTR has surged 29.1% in the past year. Landstar carries a Zacks Rank #2 (Buy).

The long-term expected earnings per share (three to five years) growth rate for C.H. Robinson is pegged at 9%. CHRW benefits from higher pricing and volumes across most of its service lines. Total revenues rallied 42.4% year over year in the first nine months of 2021, with higher revenues across all the segments.

CHRW’s measures to reward its shareholders are encouraging. Driven by the tailwinds, the stock has moved up 3% in the past year. C.H. Robinson sports a Zacks Rank #1.
 


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report
 
KnightSwift Transportation Holdings Inc. (KNX) : Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
 
Landstar System, Inc. (LSTR) : Free Stock Analysis Report
 
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