Spirit Airlines: Zacks’ Bull of the Day Play

Spirit Airlines, Inc. (SAVESnapshot Report) is flying high as crude prices continue to drop. This Zacks Rank #1 (Strong Buy) just posted a record third quarter and is expected to produce double digit earnings growth both in 2014 and 2015.

 

Spirit is a discount airline that gained fame by unbundling its services and offering customers the option about what they want to purchase- whether that is bags, seat assignment and refreshments.

Spirit makes nearly 40% of its revenue from non-ticket product purchases.

Its all-Airbus fleet operates more than 280 daily flights in the United States, Latin America and the Caribbean.

Beat Again the Third Quarter

Spirit has an excellent earnings track record, having never missed on the Zacks Consensus Estimate since its 2011 IPO, even though it has “met” three times.

On Oct 28, it didn’t disappoint as it beat the Zacks Consensus yet again, reporting earnings of $1.01 versus the Zacks Consensus of $0.96.

Spirit saw a record third quarter adjusted operating margin of 21.3% up from 20.3% a year ago.

 

Revenue rose 13.8% to $519.8 million due to growth in flight volume and higher operating yields.

Passenger flight segment (“PFS”) volume jumped 11.2% compared to the third quarter of 2013. Demand and pricing strength over the busy summer travel period drove the increase in ticket revenue per PFS.

The company took delivery of one new jet in the quarter, bringing its total to 58. It expects to add six more A320 jets to its fleet by the end of the year.

It is still expanding, adding 7 new routes in the fourth quarter and 7 new routes in the first quarter of 2015.

Shares At New All-Time High

Shares have been soaring thanks to the solid earnings report and the drop in fuel costs which goes right to the bottom line. They are trading at new all-time highs.

Spirit is no longer cheap though. It trades with a forward P/E of 23.9.

But the growth is expected to be there. Analysts see earnings growth of 33.1% in 2014 and another 35.8% in 2015.

If you’re looking for a way to play the U.S. economic recovery and the travel boom, Spirit is one to keep on your short list.

Want More of Our Best Recommendations?

Zacks’ Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential.

Learn More>>

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s