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Why Is Spirit (SAVE) Up 21.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Spirit (SAVE - Free Report) . Shares have added about 21.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Spirit due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Spirit Airlines Incurs Loss in Q4

Spirit Airlines suffered a loss of $1.61 per share for the fourth quarter, wider than the Zacks Consensus Estimate of a loss of $1.44. However, in the year-ago quarter, the company delivered earnings of $1.24. Additionally, operating revenues of $498.5 million fell short of the Zacks Consensus Estimate of $521.8 million. The top line, moreover, deteriorated 48.6% year over year due to the coronavirus-led air-travel demand disaster. Passenger revenues, which contributed 97.9% to the top line, plummeted 48.7% year over year. Additionally, revenues from other sources tanked 44.2%. Load factor declined 13.3 percentage points to 71.5% as traffic contraction (37.1%) was more than the capacity dip (25%).

Adjusted operating expenses decreased 21.5% to $659.4 million, mainly on reduced flight volume and lower fuel costs. Average fuel cost per gallon in the reported quarter fell 37.1% year over year to $1.32. Fuel gallons consumed decreased 32.9%. Nonetheless, adjusted cost per available seat miles (CASM) inched up 4.3% in the reported quarter.

Moreover, CASM excluding operating special items and fuel (non-fuel unit costs), escalated 25.2% in the reported quarter due to reduced capacity. Daily cash burn in the quarter was $1.8 million, on average. Spirit ended the year with unrestricted cash, cash equivalents and short-term investments worth $1.9 billion. Capital expenditures for 2020 were $537 million. The carrier expects first-quarter 2021 capacity to shrink 17% from the levels achieved in first-quarter 2019. Fuel cost per gallon and effective tax rate in the March quarter are anticipated to be $1.75 and 21%, respectively. Adjusted EBITDA margin is projected between -45% and -55%.

Spirit Airlines, which exited 2020 with 157 jets (31 A319 CEO, 64 A320 CEO, 32 A320 NEO and 30 A321 CEO) expects its fleet size to increase to 173 (31 A319 CEO, 64 A320 CEO, 48 A320 NEO and 30 A321 CEO) by 2021 end. The same is likely to expand further to 190 by 2022 end.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -52.76% due to these changes.

VGM Scores

Currently, Spirit has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Spirit has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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