Spirit's (SAVE) Q4 Earnings Surpass Estimates, Down Y/Y

Spirit Airline’s (NYSE:SAVE) fourth-quarter 2019 earnings per share (excluding 6 cents from non-recurring items) of $1.24 surpassed the Zacks Consensus Estimate by 5 cents. However, the bottom line declined 10.1% on a year-over-year basis due to increased operating costs.

Additionally, this low-cost carrier announced delivery of nine new aircraft (seven A320neo and two A320ceo) during the fourth quarter 2019, which is in sync with its fleet modernization efforts. The company ended the year with 145 aircraft in its fleet.

Other Q4 Details

Operating revenues of $969.8 million edged past the Zacks Consensus Estimate of $969.1 million. The top line also improved 12.4 % year over year on the back of a 18.6% expansion in flight volume. Passenger revenues, which contributed 98.1% to the top line, increased 12.4% year over year as well. Additionally, revenues from other sources rose 11.3%.

Total operating revenue per available seat mile (TRASM: a measure of unit revenues) plunged 3.6% in the reported quarter. The downside was primarily caused by lower operating yields as load factor (% of seats filled by passengers) for the period was up by 30 basis points. Notably, traffic growth (17%) outweighed capacity expansion (16.6%) in the reported quarter. Moreover, average yield declined 3.9% in the October-December period.

Adjusted operating expenses increased 16.1% to $840.2 million, mainly due to increased flight volume and higher ground handling rates. Average fuel cost per gallon in the reported quarter fell 7.1% year over year to $2.10. Moreover, cost per available seat miles(CASM) dropped 0.2% in the reported quarter.

However, CASM, excluding operating special items and fuel (non-fuel unit costs) increased 3.3% year over year. Factors like increase in heavy maintenance amortization, maintenance, material and repairs as well as other operating expenses led to higher non-fuel unit costs.

Spirit ended the year with unrestricted cash, cash equivalents and short-term investments of $1.1 billion.

Outlook

Spirit, carrying a Zacks Rank #2 (Buy), anticipates capacity growth of 15% year over year for the first quarter of 2020. Economic fuel cost is projected to be $1.90 per gallon. Moreover, an effective tax rate of 25% is envisioned during the first quarter. Operating expense per available seat mile (excluding fuel) is predicted to increase 3.5-4.5%.

For 2020, capacity is projected to increase in the 17-19% range. Economic fuel cost is anticipated to be $2.05 per gallon and adjusted operating expense per available seat mile (excluding fuel) is predicted to increase in the 1-2% range.

For 2020, the company expects total capital expenditures to be $820 million.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Investors interested in the broader Transportation sector are awaiting fourth-quarter 2019 earnings reports from key players like Air Lease Corporation (NYSE:AL) , Expeditors International of Washington (NASDAQ:EXPD) and Hertz Global Holdings ( (NYSE:HTZ)

Air Lease and Expeditors will announce quarterly results on Feb 14 and Feb 18, respectively. Hertz will release fourth-quarter results on Feb 24.

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