Shares of Spirit Airlines, Inc. (SAVE - Free Report) inched up 1.4% at the close of business on Feb 6 following the earnings release for fourth-quarter 2017. The company reported better-than-expected results in the period on higher demand for air travel.
The company’s fourth-quarter earnings (excluding $2.90 from non-recurring items) came in at 73 cents per share, beating the Zacks Consensus Estimate of 71 cents. The bottom line however, declined 5.2% on a year-over-year basis due to high fuel expenses.
Spirit Airlines reported operating revenues of $667 million, marginally ahead of the Zacks Consensus Estimate of $666 million. The top line also improved 15.3% year over year owing to a 10.4% rise in flight volume.
In the reported quarter, total revenue per available seat mile slipped 1.8% due to low passenger yields from aggressive pricing action. Load factor (percentage of seats filled by passengers) expanded to 81.6% from 81.4% in the year-ago quarter. The metric rose as traffic growth (17.9%) outpaced capacity expansion (17.6%) during the quarter under review.
Cost per available seat mile (CASM) excluding special items and fuel dipped 4.4% on the back of lower maintenance and salaries plus wages and benefits per available seat mile. Adjusted operating expense in the fourth quarter climbed 19.2% to $577.49 million.
The company has been making constant efforts to modernize its fleet. The carrier exited 2017 with 112 aircraft in its fleet.
During 2017, the company repurchased 1.2 million shares and returned approximately $45 million to shareholders.
Apart from the earnings report, Spirit Airlines has also been in the news due to the pay-related negotiations with its pilots’ union. Recently, the company inked a tentative agreement with the union (Air Line Pilots Association) representing its pilots. The agreement will now be put to vote. The agreement will become effective in the event of it being ratified.
Q1 & 2018 Outlook
The company expects capacity to rise approximately 21.5% in the first quarter of 2018. The metric is anticipated to increase 23% in 2018. Total revenue per available seat mile (TRASM) is estimated to be down 1-2.5% in the first quarter. While effective tax rate is predicted to be 25.5% and 24% in the first quarter and 2018, respectively.
Zacks Rank & Key Picks
Spirit Airlines carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the airline space are Deutsche Lufthansa AG , Air France-KLM SA (AFLYY - Free Report) and American Airlines Group, Inc. (AAL - Free Report) . While Deutsche Lufthansa sports a Zacks Rank #1 (Strong Buy), Air France-KLM and American Airlines carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Deutsche Lufthansa, Air France-KLM and American Airlines have rallied more than 13%, 11% and 10%, respectively, in the last three months.
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