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Here's Why Investors Should Avoid Spirit Airlines (SAVE) Now

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Spirit Airlines, Inc. (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 current-quarter earnings has been revised downward from earnings of 37 cents per share to a loss of 98 cents over the past 60 days. For the current year, the consensus mark for earnings has moved south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.

Bearish Industry Rank: The industry to which SAVE belongs currently has a Zacks Industry Rank of 162 (of 250 plus groups). Such an unfavorable rank places SAVE in the bottom 34% 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.

Weak Zacks Rank and Style Score: Spirit Airlines currently carries a Zacks Rank #4 (Sell). Moreover, SAVE’s current Momentum Style Score of F shows its short-term unattractiveness.

An Underperformer: The Spirit Airlines stock has lost 24% in a year's time compared with its industry’s 13.9% growth.

Zacks Investment Research
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. Northward movement in crude price is primarily due to the extension of production cut by Saudi Arabia and Russia through the current-year end. Spirit Airlines’ management now expects third-quarter fuel cost per gallon to be $3.06, up from the earlier projection of $2.80.

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 estimated to be $305 million.

Stocks to Consider

Some better-ranked stocks for investors interested in the Zacks Transportation sector are GATX Corporation (GATX - Free Report) and Triton International Limited .

GATX, which presently carries a Zacks Rank #2 (Buy), has strengthened its railcar leasing operations. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For third-quarter and full-year 2023, GATX’s earnings are expected to register 36.6% and 14.3% growth, respectively, on a year-over-year basis.

Triton, which currently carries a Zacks Rank #2, is benefiting from its consistent efforts to reward shareholders through dividends and share repurchases.

Triton has an impressive liquidity position. Its current ratio (a measure of liquidity) was 3.83 at the end of second-quarter 2023. A current ratio of more than 1 often indicates that the company will be easily paying off its short-term obligations.
 


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