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Spirit Airlines, Inc. upped its fourth-quarter guidance in November on the back of higher non-ticket revenues and increased load factor expectations. Plus, airlines got a boost recently after solid earnings reports from American Airlines and other industry giants. Looking ahead, Spirit’s top and bottom-line estimates are impressive as well. So, let’s see why SAVE is Monday’s Bull of the Day.
Overview
Spirit in November upped its Q4 total revenue per available seat mile guidance from a 6% jump to 11% growth. The guidance increase was driven by higher non-ticket revenue, including new dynamic pricing for seats and bags, among other factors. On top of the raised TRASM, which is a vital measurement for airlines, the firm cut its outlook for economic fuel costs and non-fuel unit costs.
The low-cost airline company is also coming off a strong third-quarter that saw it beat earnings and revenue estimates, despite some overall industry headwinds. Meanwhile, American Airlines, JetBlue Airways and Southwest Airlines all surged on the back of strong quarterly earnings reports last Thursday. Investors should also note that the airline companies said they could increase their revenues in the first quarter despite the government shutdown. Airlines, however, did warn that the continuation of the shutdown could spell some trouble down the road.
SAVE stock hovered at around $57.10 a share on Friday. This marked a roughly 12.5% downturn from its 52-week high of $65.35 per share and could set up a solid buying opportunity for those high on Spirit.
Q4 & Fiscal 2019 Outlook
Spirit released in the middle of January some preliminary Q4 guidance. The firm’s TRASM popped 11.4%, which topped its updated November estimate that called for 11% expansion, with the gains driven by “modestly stronger peak yields.” Spirit’s available seat miles in the quarter also surged 16.2% year over year to come in above its previous 15% guidance.
On top of that, Spirit reported a record quarterly completion factor of 99.6%. With that said, our current Zacks Consensus Estimate calls for SAVE’s fourth-quarter revenues to soar 27.8% to reach $852.24 million. This would crush the year-ago period’s 15.3% revenue expansion, but mark a slight slowdown compared to Q3’s 31.6% top-line surge.
Looking a bit further ahead, Spirit’s fiscal Q1 revenues are projected to jump nearly 20% and its full-year 2019 revenues are expected to climb over 16% above our current-year estimate to reach $3.85 billion.
Moving onto the bottom end of the income statement, the firm’s adjusted Q4 earnings are projected to skyrocket 90.4% to touch $1.39 a share. Investors should note that this would blow away last quarter’s 56% bottom-line expansion. Meanwhile, Spirit’s full-year 2018 earnings are projected to climb 31.8%. Plus, the company’s fiscal 2019 earnings are expected to soar 49.4% higher than our 2018 projection.
Earnings Trends
Maybe more important than Spirit’s stellar quarterly and longer-term earnings outlook is the firm’s recent string of positive earnings estimate revisions. We can see that within the last 30 days, at least some analyst have grown more bullish on SAVE’s earnings. Spirit’s positive bottom-line revision activity is a good sign because earnings growth is one of the best long-term indicators of positive stock price movement.
The overall retail-restaurant industry gained 6.23% last year, while the S&P 500 slipped over 4%. Red Robin Gourmet Burgers, Inc., however, was not one of the restaurant industry’s winners as it suffered from subdued comparable sales, poor dine-in traffic, rising costs, and more.
Overview & Outlook
Red Robin is a casual restaurant chain best known for its burgers and fries. The company boasts more than 570 mostly suburban locations across the U.S. and Canada. In 2018, RRGB stock plummeted roughly 53% for the reasons we mentioned at the top.
Red Robin’s revenues fell 3.5% in the third quarter on the back of a 3.4% drop in same-store sales. RRGB’s revenues also fell short of Wall Street Estimates for the third straight quarter. Plus, the firm’s guest count comps slipped 1.9% from the year-ago period. Red Robin’s operating costs also climbed as it spent more on technology updates, repairs and maintenance expenses, third-party delivery fees, and more.
Red Robin hopes its spending will help the company lower wait times. The company also rolled out its new in-restaurant table management software to lower ticket times, improve tableside service, and handle larger volumes during peak hours. On top of that, Red Robin has tried to expand its online-ordering business and ramp up its carry-out, delivery, and catering sales.
Q4 Estimates
Looking ahead, Red Robin’s fourth-quarter revenues are projected to sink 9.83% from $342.35 million in the year-ago period to $308.70 million. Clearly, year over year declines are never good, but we should note that RRGB’s fourth-quarter 2017 revenues soared 17.5%. This growth was, however, driven primarily by new restaurant openings.
Investors should also note that Red Robin’s Q4 comps are projected to fall 3% based on our current NFM estimates. Jumping ahead to fiscal 2019, Red Robin is expected to see its full-year revenues slip marginally below our 2018 estimate.
Moving on, Red Robin’s adjusted Q4 earnings are expected to plummet 51.28% to touch $0.38 a share. Meanwhile, the company’s full-year earnings are also projected to sink 32.53%. RRGB’s fiscal 2019 EPS figure is expected to climb 2.1% above our 2018 projection, which is hardly impressive considering just how much its bottom-line is expected decline.
Earnings Trends
On top of its expected top and bottom line downturns, Red Robin has also experienced some negative earnings estimate revision activity over the last 90 days. In fact, RRGB has seen its Q4 earnings estimate fall from $0.63 a share to its current $0.38 during this stretch. Investors will also see that Red Robin has earned some negative earnings estimate revisions for fiscal 2018 and 2019 over the 30 days. This means at least some analysts are even more bearish on the burger joint’s bottom-line.
Bottom Line
Red Robin is a Zacks Rank #5 (Strong Sell) at the moment based, in large part, on the negative earnings revision trends we just touched on. Even though RRGB stock has tumbled over the last 52-weeks, it might have a hard time bouncing back in 2019 based on its top and bottom line projections as it fights to adapt to a quickly changing retail age.
Caterpillar Looks Good Ahead of Q4 Earnings
Caterpillar Inc.is scheduled to report fourth-quarter earnings, before the opening bell on Jan 28. Investors will now have an insight into how much of an impact did the recent economic slowdown in China have on the manufacturer and seller of construction and mining equipment in the said quarter. After all, companies like Apple Inc. cautioned about weak iPhone sales in China, while FedEx Corporation confirmed that weakness in China was hurting their profit margins.
China has spent a lot on infrastructure over the past few years. But, the recent slowdown hurt construction projects, bringing down the sale of excavators, tractors and bulldozers for Caterpillar.
A stalemate in trade talks between China and the United States isn’t helping the company either. Last October, Caterpillar confirmed that the impact of tariffs on metal was nearly $40 million in the third quarter and is expected to climb to $100 million and $200 million for 2018. This was, in fact, the primary reason why Caterpillar’s shares were down almost 20% last year, lagging the broader equity market. Take a look —
Factors That Raise Earnings Optimism
No doubt, China’s slowdown could be bad news for Caterpillar. But, the company should do well heading into earnings, banking on strong U.S. construction fundamentals. Caterpillar has significant exposure to residential and nonresidential construction. And in 2018, it is estimated that the U.S. residential sector will expand 4.3% and the non-residential sector will grow 0.9%, according to a report by international contractor, Mace. An uptick in wage growth and ultra-low borrowing costs are cited to be the factors driving demand for additional housing.
Caterpillar also has exposure to the oil and gas industry. Needless to say, oil and gas production is increasing despite lower oil prices, which surely acts a tailwind for Caterpillar’s business. The company, by the way, has restructured its resource business to curtail fixed costs, a move that is expected to boost earnings.
JP Morgan analysts led by Ann Duignan added that “Caterpillar’s resource business is still in the early stages of recovery and should support out-year earnings growth as well as opportunities for shareholder friendly capital allocation.” JP Morgan has given the stock an overweight with a price target of $188, which is almost 42% above current levels.
Caterpillar to See Earnings Upside
Caterpillar is well poised to report an uptick in fourth-quarter earnings, powered by gains in its construction, oil and gas, and resource businesses. Caterpillar is widely expected to report $2.98 of earnings per share for the fourth quarter, higher than $2.16 reported a year ago.
This Zacks Rank #3 (Hold) company has an Earnings ESP of +0.30%. This is Zacks’ proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Generally, stocks with a Zacks Rank #3 or better along with a positive Earnings ESP come up with a positive surprise 70% of the time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for current fiscal earnings has trended upward over the past 60 days, as estimates have moved up from $11.64/share to $11.65/share right now.
Upbeat earnings performance, no doubt, will lead to a rally in the share price. Thus, the company’s expected earnings growth rate for the current year is a solid 69.3%, in contrast to the Manufacturing - Construction and Mining industry’s projected decline of 2.1%. In fact, the company has outperformed the broader industry so far this year (+4.4% vs +4.0%).
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Spirit, Red Robin, Caterpillar, Apple and FedEx highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 28, 2018 – Zacks Equity Research Spirit Airlines, Inc. (SAVE - Free Report) as the Bull of the Day, Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) ast he Bear of the Day. In addition, Zacks Equity Research provides analysis on Caterpillar Inc. (CAT - Free Report) , Apple Inc. (AAPL - Free Report) and FedEx Corporation (FDX - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Spirit Airlines, Inc. upped its fourth-quarter guidance in November on the back of higher non-ticket revenues and increased load factor expectations. Plus, airlines got a boost recently after solid earnings reports from American Airlines and other industry giants. Looking ahead, Spirit’s top and bottom-line estimates are impressive as well. So, let’s see why SAVE is Monday’s Bull of the Day.
Overview
Spirit in November upped its Q4 total revenue per available seat mile guidance from a 6% jump to 11% growth. The guidance increase was driven by higher non-ticket revenue, including new dynamic pricing for seats and bags, among other factors. On top of the raised TRASM, which is a vital measurement for airlines, the firm cut its outlook for economic fuel costs and non-fuel unit costs.
The low-cost airline company is also coming off a strong third-quarter that saw it beat earnings and revenue estimates, despite some overall industry headwinds. Meanwhile, American Airlines, JetBlue Airways and Southwest Airlines all surged on the back of strong quarterly earnings reports last Thursday. Investors should also note that the airline companies said they could increase their revenues in the first quarter despite the government shutdown. Airlines, however, did warn that the continuation of the shutdown could spell some trouble down the road.
SAVE stock hovered at around $57.10 a share on Friday. This marked a roughly 12.5% downturn from its 52-week high of $65.35 per share and could set up a solid buying opportunity for those high on Spirit.
Q4 & Fiscal 2019 Outlook
Spirit released in the middle of January some preliminary Q4 guidance. The firm’s TRASM popped 11.4%, which topped its updated November estimate that called for 11% expansion, with the gains driven by “modestly stronger peak yields.” Spirit’s available seat miles in the quarter also surged 16.2% year over year to come in above its previous 15% guidance.
On top of that, Spirit reported a record quarterly completion factor of 99.6%. With that said, our current Zacks Consensus Estimate calls for SAVE’s fourth-quarter revenues to soar 27.8% to reach $852.24 million. This would crush the year-ago period’s 15.3% revenue expansion, but mark a slight slowdown compared to Q3’s 31.6% top-line surge.
Looking a bit further ahead, Spirit’s fiscal Q1 revenues are projected to jump nearly 20% and its full-year 2019 revenues are expected to climb over 16% above our current-year estimate to reach $3.85 billion.
Moving onto the bottom end of the income statement, the firm’s adjusted Q4 earnings are projected to skyrocket 90.4% to touch $1.39 a share. Investors should note that this would blow away last quarter’s 56% bottom-line expansion. Meanwhile, Spirit’s full-year 2018 earnings are projected to climb 31.8%. Plus, the company’s fiscal 2019 earnings are expected to soar 49.4% higher than our 2018 projection.
Earnings Trends
Maybe more important than Spirit’s stellar quarterly and longer-term earnings outlook is the firm’s recent string of positive earnings estimate revisions. We can see that within the last 30 days, at least some analyst have grown more bullish on SAVE’s earnings. Spirit’s positive bottom-line revision activity is a good sign because earnings growth is one of the best long-term indicators of positive stock price movement.
Bear of the Day:
The overall retail-restaurant industry gained 6.23% last year, while the S&P 500 slipped over 4%. Red Robin Gourmet Burgers, Inc., however, was not one of the restaurant industry’s winners as it suffered from subdued comparable sales, poor dine-in traffic, rising costs, and more.
Overview & Outlook
Red Robin is a casual restaurant chain best known for its burgers and fries. The company boasts more than 570 mostly suburban locations across the U.S. and Canada. In 2018, RRGB stock plummeted roughly 53% for the reasons we mentioned at the top.
Red Robin’s revenues fell 3.5% in the third quarter on the back of a 3.4% drop in same-store sales. RRGB’s revenues also fell short of Wall Street Estimates for the third straight quarter. Plus, the firm’s guest count comps slipped 1.9% from the year-ago period. Red Robin’s operating costs also climbed as it spent more on technology updates, repairs and maintenance expenses, third-party delivery fees, and more.
Red Robin hopes its spending will help the company lower wait times. The company also rolled out its new in-restaurant table management software to lower ticket times, improve tableside service, and handle larger volumes during peak hours. On top of that, Red Robin has tried to expand its online-ordering business and ramp up its carry-out, delivery, and catering sales.
Q4 Estimates
Looking ahead, Red Robin’s fourth-quarter revenues are projected to sink 9.83% from $342.35 million in the year-ago period to $308.70 million. Clearly, year over year declines are never good, but we should note that RRGB’s fourth-quarter 2017 revenues soared 17.5%. This growth was, however, driven primarily by new restaurant openings.
Investors should also note that Red Robin’s Q4 comps are projected to fall 3% based on our current NFM estimates. Jumping ahead to fiscal 2019, Red Robin is expected to see its full-year revenues slip marginally below our 2018 estimate.
Moving on, Red Robin’s adjusted Q4 earnings are expected to plummet 51.28% to touch $0.38 a share. Meanwhile, the company’s full-year earnings are also projected to sink 32.53%. RRGB’s fiscal 2019 EPS figure is expected to climb 2.1% above our 2018 projection, which is hardly impressive considering just how much its bottom-line is expected decline.
Earnings Trends
On top of its expected top and bottom line downturns, Red Robin has also experienced some negative earnings estimate revision activity over the last 90 days. In fact, RRGB has seen its Q4 earnings estimate fall from $0.63 a share to its current $0.38 during this stretch. Investors will also see that Red Robin has earned some negative earnings estimate revisions for fiscal 2018 and 2019 over the 30 days. This means at least some analysts are even more bearish on the burger joint’s bottom-line.
Bottom Line
Red Robin is a Zacks Rank #5 (Strong Sell) at the moment based, in large part, on the negative earnings revision trends we just touched on. Even though RRGB stock has tumbled over the last 52-weeks, it might have a hard time bouncing back in 2019 based on its top and bottom line projections as it fights to adapt to a quickly changing retail age.
Caterpillar Looks Good Ahead of Q4 Earnings
Caterpillar Inc.is scheduled to report fourth-quarter earnings, before the opening bell on Jan 28. Investors will now have an insight into how much of an impact did the recent economic slowdown in China have on the manufacturer and seller of construction and mining equipment in the said quarter. After all, companies like Apple Inc. cautioned about weak iPhone sales in China, while FedEx Corporation confirmed that weakness in China was hurting their profit margins.
China has spent a lot on infrastructure over the past few years. But, the recent slowdown hurt construction projects, bringing down the sale of excavators, tractors and bulldozers for Caterpillar.
A stalemate in trade talks between China and the United States isn’t helping the company either. Last October, Caterpillar confirmed that the impact of tariffs on metal was nearly $40 million in the third quarter and is expected to climb to $100 million and $200 million for 2018. This was, in fact, the primary reason why Caterpillar’s shares were down almost 20% last year, lagging the broader equity market. Take a look —
Factors That Raise Earnings Optimism
No doubt, China’s slowdown could be bad news for Caterpillar. But, the company should do well heading into earnings, banking on strong U.S. construction fundamentals. Caterpillar has significant exposure to residential and nonresidential construction. And in 2018, it is estimated that the U.S. residential sector will expand 4.3% and the non-residential sector will grow 0.9%, according to a report by international contractor, Mace. An uptick in wage growth and ultra-low borrowing costs are cited to be the factors driving demand for additional housing.
Caterpillar also has exposure to the oil and gas industry. Needless to say, oil and gas production is increasing despite lower oil prices, which surely acts a tailwind for Caterpillar’s business. The company, by the way, has restructured its resource business to curtail fixed costs, a move that is expected to boost earnings.
JP Morgan analysts led by Ann Duignan added that “Caterpillar’s resource business is still in the early stages of recovery and should support out-year earnings growth as well as opportunities for shareholder friendly capital allocation.” JP Morgan has given the stock an overweight with a price target of $188, which is almost 42% above current levels.
Caterpillar to See Earnings Upside
Caterpillar is well poised to report an uptick in fourth-quarter earnings, powered by gains in its construction, oil and gas, and resource businesses. Caterpillar is widely expected to report $2.98 of earnings per share for the fourth quarter, higher than $2.16 reported a year ago.
This Zacks Rank #3 (Hold) company has an Earnings ESP of +0.30%. This is Zacks’ proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Generally, stocks with a Zacks Rank #3 or better along with a positive Earnings ESP come up with a positive surprise 70% of the time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for current fiscal earnings has trended upward over the past 60 days, as estimates have moved up from $11.64/share to $11.65/share right now.
Upbeat earnings performance, no doubt, will lead to a rally in the share price. Thus, the company’s expected earnings growth rate for the current year is a solid 69.3%, in contrast to the Manufacturing - Construction and Mining industry’s projected decline of 2.1%. In fact, the company has outperformed the broader industry so far this year (+4.4% vs +4.0%).
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.