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Bull of the Day: Spirit Airlines (SAVE)

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Spirit Airlines, Inc. (SAVE - Free Report) 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 (AAL - Free Report) 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 (JBLU - Free Report) , and Southwest Airlines (LUV - Free Report) 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.

Bottom Line

Spirit is a Zacks Rank #1 (Strong Buy) stock at the moment, based largely on its impressive earnings estimate revision activity over the last month. SAVE also sports “A” grades for both Value and Momentum in our Style Scores system to help it earn an overall “A” VGM score.

Spirit certainly looks like a stock to consider for investors interested in the airline industry because of its revenue growth outlook and double-digit earnings expansion projections. The company is scheduled to host its fourth-quarter and fiscal 2018 earnings call on Wednesday, February 6.

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