Spirit (SAVE) Q1 Loss Wider Than Expected, Stock Takes a Hit

Spirit Airlines SAVE incurred loss of 86 cents per share (excluding 45 cents from non-recurring items) in first-quarter 2020, wider than the Zacks Consensus Estimate of a loss of 60 cents. In the year-ago quarter, the company reported earnings of 84 cents. First-quarter results reflect the impact of the coronavirus crisis on domestic and international air travel in March. Following the earnings release, shares of Spirit declined 12.1% in after-hours trading on May 6.

Operating revenues of $771.1 million missed the Zacks Consensus Estimate of $848.8 million and also declined 9.9% year over year. Passenger revenues, which contributed 97.7% to the top line, fell 10.1% year over year. Additionally, revenues from other sources dropped 1.1%.

Other Details on Q1

Total operating revenue per available seat mile (TRASM: a measure of unit revenues) plunged 18.8% in the reported quarter. The downside was caused by fall in load factor (% of seats filled by passengers) and yields due to the COVID-19 crisis. Notably, capacity expanded (11%) while traffic contracted (2.3%) in the quarter, leading to a 990-basis point decline in load factor (72.8% in the first quarter). Moreover, average yield declined 7.85 in the January-March period.

Adjusted operating expenses increased 8.2% to $829.07 million, mainly on increased flight volume and higher depreciation and amortization. Average fuel cost per gallon in the reported quarter fell 13.4% year over year to $1.81. Moreover, adjusted cost per available seat miles (CASM) dropped 2.4% in the reported quarter.

However, CASM, excluding operating special items and fuel (non-fuel unit costs), increased 3.3% year over year.Increased expenses on salaries, wages and benefits led to higher non-fuel unit costs.

Spirit ended the quarter with unrestricted cash, cash equivalents, and short-term investments of $894.4 million and an undrawn $110 million revolver.

Spirit Airlines Inc Price, Consensus and EPS Surprise

 

Spirit Airlines Inc Price, Consensus and EPS Surprise

Spirit Airlines Inc price-consensus-eps-surprise-chart | Spirit Airlines Inc Quote

Dealing With the Coronavirus Crisis

Due to an unprecedented drop in passenger demand in the wake of the coronavirus outbreak and to comply with government-imposed travel restrictions, the Zacks Rank #3 (Hold) company reduced its April capacity by approximately 75%. The same has been reduced by approximately 95% for May and June. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

With stringent cost-cutting measures, the airline has been able to reduce capital spending by approximately $50 millionfor 2020. Additionally, the carrier is in talks with Airbus to defer some of its aircraft deliveries for 2020 and 2021, which would help the airline lower aircraft-related capital expenses by approximately $185 million.

Besides savings from lower capacity, Spirit reduced non-fuel operating costs by $20-$30 million for 2020.

Performance of Other Airline Stocks

Delta Air Lines DAL incurred a loss of 51 cents (excluding 33 cents from non-recurring items) in the March quarter, narrower than the Zacks Consensus Estimate of a loss of 72 cents. In the year-ago quarter, the company reported earnings (on an adjusted basis) of 96 cents per share. Total revenues of $8,592 million lagged the Zacks Consensus Estimate of $9,637.5 million and also declined 18% year over year.

Southwest Airlines LUV incurred loss of 15 cents per share (excluding 3 cents from non-recurring items) in the first quarter of 2020, narrower than the Zacks Consensus Estimate of 48 cents. In the year-ago quarter, the company reported earnings of 70 cents per share. The results reflect the coronavirus-induced drop in passenger demand. Meanwhile, operating revenues of $4,234 million lagged the Zacks Consensus Estimate of $4,397 million and also declined 17.8% year over year.

American Airlines AAL incurred a loss (excluding $2.61 from non-recurring items) of $2.65 per share, wider than the Zacks Consensus Estimate of a loss of $2.16. The company reported earnings per share of 52 cents in the year-ago quarter. Results in first-quarter 2020 were hurt by the coronavirus-led drop in air-travel demand. Operating revenues of $8,515 million declined 19.6% year over year and also fell short of the Zacks Consensus Estimate of $9,146.7 million.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Southwest Airlines Co (LUV) : Free Stock Analysis Report
 
Delta Air Lines Inc (DAL) : Free Stock Analysis Report
 
American Airlines Group Inc (AAL) : Free Stock Analysis Report
 
Spirit Airlines Inc (SAVE) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research