Spirit (SAVE) Q3 Loss Narrower Than Expected, Shares Pop

Zacks Equity Research
·4 min read

Spirit Airlines Inc. SAVE incurred a loss of $2.32 per share (excluding $1.25 from non-recurring items) in third-quarter 2020, narrower than the Zacks Consensus Estimate of a loss of $2.63. In the year-ago quarter, the company reported earnings of $1.32. Results reflect continued softness in air-travel demand amid the coronavirus pandemic. Meanwhile, operating revenues of $401.9 million beat the Zacks Consensus Estimate of $384.7 million. Following the better-than-expected third-quarter performance, shares of the company gained 2.3% in after-market trading on Oct 28.

The top line, however, plunged 59.5% year over year with passenger revenues, contributing 97.7% to the top line, plummeting 59.7% year over year. Additionally, revenues from other sources dropped 50.7%.

Total operating revenue per available seat mile (TRASM: a measure of unit revenues) plunged 39.5% in the reported quarter. The downside was caused by fall in load factor (% of seats filled by passengers) and yields due to the COVID-19 crisis. While capacity contracted 33%, traffic declined 46.1%. With traffic declining more than the amount of capacity contraction, load factor fell 1670 basis points to 68.1% in the third quarter. Average yield slipped 24.7% in the same period.

Spirit Airlines, Inc. Price, Consensus and EPS Surprise

Spirit Airlines, Inc. Price, Consensus and EPS Surprise
Spirit Airlines, Inc. Price, Consensus and EPS Surprise

Spirit Airlines, Inc. price-consensus-eps-surprise-chart | Spirit Airlines, Inc. Quote

Adjusted operating expenses dropped 24.3% to $649.70 million due to reduction in aircraft fuel expenses and decreased flight volume. Average fuel cost per gallon in the reported quarter fell 38.9% year over year to $1.27. However, adjusted cost per available seat miles (“CASM”) climbed 13% in the reported quarter. Adjusted CASM, excluding fuel, surged 36.9% in the reported quarter.

Spirit ended the quarter with unrestricted cash, cash equivalents, and short-term investment securities of $2.1 billion.

Outlook

Spirit, carrying a Zacks Rank #4 (Sell), anticipates its capacity to decline approximately 25% year over year in the fourth quarter. Additionally, the airline expects operating revenues to decrease approximately 43-45% year over year in the period. Adjusted operating expenses are estimated to be between $675 and $685 million in the current quarter. For the fourth quarter, the company predicts average daily cash burn to improve to about $2 million per day, from $2.3 million reported in the third quarter.

For 2020, total capital expenditures are fore cast to be approximately $545 million. Of the total amount, Spirit expects to incur around $45 million in the fourth quarter.

Sectorial Snapshot

Let’s take a look into some other Zacks Transportation sector companies’ third-quarter earnings.

Southwest Airlines Co. LUV, carrying a Zacks Rank #3 (Hold), incurred a loss of $1.99 per share (excluding 3 cents from non-recurring items) in the third quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of $2.44. Moreover, operating revenues of $1,793 million surpassed the Zacks Consensus Estimate of $1,678.2 million. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Trinity Industries Inc TRN, carrying a Zacks Rank #3, reported third-quarter 2020 earnings (excluding 4 cents from non-recurring items) of 17 cents per share, massively surpassing the Zacks Consensus Estimate of 5 cents. Total revenues of $459.4 million also outperformed the Zacks Consensus Estimate of $443.8 million.

CSX Corporation CSX, carrying a Zacks Rank of 3, reported third-quarter 2020 earnings of 96 cents per share, surpassing the Zacks Consensus Estimate of 93 cents. However, total revenues of $2,648 million lagged the Zacks Consensus Estimate of $2,704.6 million.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot stocks we're targeting >>


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
 
Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
CSX Corporation (CSX) : Free Stock Analysis Report
 
Trinity Industries, Inc. (TRN) : Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.