Spirit Airlines (NYSE: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.
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 (NASDAQ:EXPD) , Old Dominion Freight Line (NASDAQ:ODFL) and Copa Holdings (NYSE: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.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
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
Old Dominion Freight Line, Inc. (ODFL): Get Free Report
Original post
Zacks Investment Research