Shares of Spirit Airlines, Inc. SAVE reached a 52-week high of $62.84 on Nov 29 before retracing a bit to close the day at $62. Moreover, the stock has surged 45.4% in a year against the industry’s 11.1% decline.
One Year Price Performance
Catalysts Behind the Price Surge
The low-cost Miramar, FL-based airline recently grabbed headlines, courtesy of its remarkably improved unit revenue guidance for the fourth quarter of 2018. Following this significantly raised guidance, shares of Spirit Airlines have been flying high to finally settle on a 52-week high. The carrier now anticipates total revenue per available seat miles (TRASM: a key measure of unit revenues) to increase approximately 11% year over year (the earlier view expected this metric to increase approximately 6%). Apart from the strong unit revenue projection, the carrier has trimmed outlook for non-fuel unit costs and economic fuel cost for the current quarter. (Read more: Spirit Airlines Hikes Q4 TRASM Projection, Stock Up)
Now that oil prices are exhibiting a downward trend, things seem to be looking up for the entire industry. Spirit Airlines being no exception will certainly gain from the upbeat scenario after having struggled with declining bottom lines in the first two quarters of the ongoing year.
However, it is worth noting that Spirit Airlines delivered an impressive third-quarter 2018 performance despite the fuel cost headwind. The company reported better-than-expected earnings and revenues with both the top and the bottom lines soaring a respective 31.6% and 56.4% year over year. Also, the company’s total unit revenues increased 5.5%.
This encouraging performance despite adversities can certainly be attributed to the company’s constant measures to improve operational efficiency by reducing non-fuel unit costs. Notably, unit costs (excluding fuel and special items) decreased 6.8% in the first nine months of 2018. For the full year, the company expects the same to decrease in the 3.5-4% band year over year. Strong passenger revenues are further driving the company’s growth. Passenger revenues jumped 25.6% in the first nine months of this year.
Owing to these tailwinds, the Zacks Consensus Estimate for the company’s current-quarter earnings has been revised 30.5% upward in the last 60 days. Also, the same for full-year earnings has been moved 15% north over the same time frame.
Zacks Rank & Other Key Picks
Spirit Airlines currently flaunts a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the broader Transportation sector include Air France-KLM AFLYY, International Consolidated Airlines Group ICAGY and CAI International CAI, each sporting a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Air France-KLM and CAI International have gained 46.6% and 2%, respectively, in the past six months. Meanwhile, the International Consolidated Airlines stock boasts a laudable earnings history, having trumped the Zacks Consensus Estimate in three of the last four reported quarters, the average beat being 92.9%.
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