Spirit Airlines Meets Q1 Earnings Ests - Analyst Blog

U.S. low cost carrier Spirit Airlines Co.'s SAVE reported first quarter earnings of 52 cents per share, in line with the Zacks Consensus Estimate. Earnings however, surged 15.6% from 45 cents in the prior-year quarter. The company's in line performance failed to encourage shareholders, pulling the stock price down by almost 3% on Tuesday trade on Nasdaq.

Quarterly revenues moved up 18.2% year over year to $438.0 million but missed the Zacks Consensus Estimate of $440.0 million. On a year-over-year basis, Passenger revenues increased 16.0% while Non-Ticket revenues increased 21.5%. Improvement in flight volume impacted the results positively. However, during the quarter, the company had to cancel 256 flights owing to weather-related disruptions.

Operating Statistics

Revenue passenger miles moved up 23.6% year over year to 3.29 billion in the first quarter. Capacity or available seat miles increased 21.0% year over year to 3.78 billion, while load factor (percentage of seats filled with passengers) leaped 180 basis points year over year to 86.9%. Revenue per available seat mile (RASM) increased 2.4% year over year to 11.57 cents.

Operating Expenses & Operating Income

For the first quarter, operating income increased to $56.95 million from $49.67 million in the year-ago quarter. Total operating expenses increased 17.9% year over year to $378.0 million. Average fuel price (economic) was $3.18 per gallon, down 4.2% from $3.32 in the year-ago quarter. Consolidated unit cost or cost per available seat mile CASM, excluding fuel and special items, increased 0.3%.

Liquidity

At the end of the first quarter, Spirit had $544.0 million in unrestricted cash and cash equivalents and no debt in its balance sheet. Spirit generated operating cash flow of $90.64 million and capital expenditures were $4.1 million in the quarter. The carrier also paid $73.2 million in pre-delivery deposits for future deliveries of aircraft. The company took delivery of 2 new Airbus A-320 aircraft, taking its total fleet count to 56 aircraft at quarter end.

In the first quarter, return on invested capital (before taxes and excluding special items) was 31.2%.

Other Airline Releases

Delta Air Lines Inc. DAL reported first-quarter 2014 adjusted earnings of 33 cents, beating the Zacks Consensus Estimate of 29 cents, while Southwest Airline Co.'s LUV earnings of 18 cents was also ahead of our estimate of 16 cents.

However, United Continental Holdings Inc. UAL posted a loss of $1.33 per share, narrower than the Zacks Consensus Estimate of a loss of $1.38.

Our Take

We believe that the company will benefit from service launch in several markets along with its focus on delivering low fares to its valued customers. Additionally, the company has ordered new aircraft from Airbus, which will enhance customer comfort. However, increase in operating expenses remains a near-term headwind.

Spirit Airlines currently holds a Zacks Rank #3, implying a Hold rating.