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Here's Why Investors Should Avoid Spirit Airlines (SAVE) Now
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Spirit Airlines (SAVE - Free Report) is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for the current quarter is pegged at a loss of $1.38 per share, wider than a loss of 5 cents 60 days ago. For the current year, the consensus mark is pegged at a loss of $3.29, extending from a loss of $1.62 in the past 60 days. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: SpiritAirlines currently carries a Zacks Rank #4 (Sell). Further, its current Value Style Score of F shows its unattractiveness.
Unimpressive Price Performance: SAVE has fallen 48.2% over the past six months compared with its industry’s 11.5% decline.
Image Source: Zacks Investment Research
Other Headwinds: The current scenario of rising fuel costs does not bode well for the airline and is hurting its bottom line. The northward movement in crude oil price is primarily due to an extension of production cut by Saudi Arabia and Russia through the current-year end. In third-quarter 2023, average fuel price per gallon rose 18.3% sequentially to $3.10. The metric is expected to be $3.15 in fourth-quarter 2023.
Increased promotional-activity-related discounts hurt third-quarter results. These discounts were for travel booked for September-quarter second half through the pre-Thanksgiving travel period.
For fourth-quarter 2023, the company projects total revenues in the $1.28-$1.32 billion range. Management believes that SAVE will experience discounted fares for the off-peak travel periods throughout the fourth quarter of 2023. Adjusted operating margin is suggested to be between -15% and -19%.
High capital expenditure may play spoilsport and dent the company's free cash flow generating ability. During 2022, capital expenditures were $237.6 million, primarily related to the purchase of spare parts. Capex for 2023 is envisioned to be $245 million.
Bearish Industry Rank: The industry, to which Spirit Airlines belongs, currently has a Zacks Industry Rank of 218 (of 250 plus groups). Such an unfavorable rank places it in the bottom 12% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Airline Stocks to Consider
Investors interested in the airline industry may consider stocks like Air Canada (ACDVF - Free Report) and SkyWest (SKYW - Free Report) .
Air Canada currently sports a Zacks Rank #1 (Strong Buy). An uptick in passenger traffic is aiding ACDVF. Recently, management announced plans to launch a new year-round route between Montreal and Madrid. You can see the complete list of today’s Zacks #1 Rank stocks here.
The service will commence in May of the following year as part of its expanded international summer 2024 flying schedule to cater to increased demand. The Zacks Consensus Estimate for current-year earnings has jumped 32.6% in the past 60 days.
SkyWest currently carries a Zacks Rank #2 (Buy). SKYW's fleet-modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for current-year earnings has surged 83.3% in the past 60 days.
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Here's Why Investors Should Avoid Spirit Airlines (SAVE) Now
Spirit Airlines (SAVE - Free Report) is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for the current quarter is pegged at a loss of $1.38 per share, wider than a loss of 5 cents 60 days ago. For the current year, the consensus mark is pegged at a loss of $3.29, extending from a loss of $1.62 in the past 60 days. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: SpiritAirlines currently carries a Zacks Rank #4 (Sell). Further, its current Value Style Score of F shows its unattractiveness.
Unimpressive Price Performance: SAVE has fallen 48.2% over the past six months compared with its industry’s 11.5% decline.
Image Source: Zacks Investment Research
Other Headwinds: The current scenario of rising fuel costs does not bode well for the airline and is hurting its bottom line. The northward movement in crude oil price is primarily due to an extension of production cut by Saudi Arabia and Russia through the current-year end. In third-quarter 2023, average fuel price per gallon rose 18.3% sequentially to $3.10. The metric is expected to be $3.15 in fourth-quarter 2023.
Increased promotional-activity-related discounts hurt third-quarter results. These discounts were for travel booked for September-quarter second half through the pre-Thanksgiving travel period.
For fourth-quarter 2023, the company projects total revenues in the $1.28-$1.32 billion range. Management believes that SAVE will experience discounted fares for the off-peak travel periods throughout the fourth quarter of 2023. Adjusted operating margin is suggested to be between -15% and -19%.
High capital expenditure may play spoilsport and dent the company's free cash flow generating ability. During 2022, capital expenditures were $237.6 million, primarily related to the purchase of spare parts. Capex for 2023 is envisioned to be $245 million.
Bearish Industry Rank: The industry, to which Spirit Airlines belongs, currently has a Zacks Industry Rank of 218 (of 250 plus groups). Such an unfavorable rank places it in the bottom 12% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Airline Stocks to Consider
Investors interested in the airline industry may consider stocks like Air Canada (ACDVF - Free Report) and SkyWest (SKYW - Free Report) .
Air Canada currently sports a Zacks Rank #1 (Strong Buy). An uptick in passenger traffic is aiding ACDVF. Recently, management announced plans to launch a new year-round route between Montreal and Madrid. You can see the complete list of today’s Zacks #1 Rank stocks here.
The service will commence in May of the following year as part of its expanded international summer 2024 flying schedule to cater to increased demand. The Zacks Consensus Estimate for current-year earnings has jumped 32.6% in the past 60 days.
SkyWest currently carries a Zacks Rank #2 (Buy). SKYW's fleet-modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for current-year earnings has surged 83.3% in the past 60 days.