Spirit Airlines Could Continue To Fly High In 2019, Raymond James Says

Spirit Airlines Incorporated SAVE posted a positive investor update for Q4, ahead of its Feb. 6 earnings release. This should ease concerns over a deteriorating industry revenue environment, especially for leisure carriers, according to Raymond James.

The Analyst

Savanthi Syth maintains a Strong Buy rating on Spirit Airlines with an $80 price target.

The Thesis

Spirit Airlines has been recording positive RASM (revenue per available seat mile) growth. For Q4, the company’s RASM is tracking at 11.4 percent year-on-year, which is 40 bps higher than its late November guidance and the Street’s estimate of 11 percent.

Spirit Airlines cited stronger peak yields as the reason for the improved performance. The figure was also driven by the company’s own initiatives and easy comps, Syth said.

The operating EPS estimates for 2018, 2019 and 2020 have been raised from $4.32 to $4.39, from $5.70 to $6.25 and from $6.20 to $6.55, respectively.

Syth added, however, that the company’s RASM could come under pressure in 1Q19 due to the Easter impact and tougher comps. The government shutdown also could create some uncertainty.

“We continue to believe impressive cost discipline, ancillary revenue initiatives, and tactical network adjustments will continue to support earnings recovery at Spirit,” the analyst wrote in the report.

Price Action

Shares of Spirit Airlines traded at $59.64 Thursday afternoon.

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