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Spirit Airlines' Problems: No End in Sight?

PART:
1 2 3 4 5 6 7
Part 6
Spirit Airlines' Problems: No End in Sight? PART 6 OF 7

What Wall Street Predicts for Spirit Airlines in Q3

Revenue growth

For the third quarter of 2017, Spirit Airlines’ (SAVE) revenues are estimated to grow 13.5% year-over-year or YoY to $704.5 million. This should be followed by 11.3% YoY growth for the fourth quarter to $643.9 billion.

What Wall Street Predicts for Spirit Airlines in Q3

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This growth should lead to full-year 2017 revenue growth of 13.4% YoY to $2.6 billion, which would be higher than the company’s 2016 revenue growth of 8.5% YoY and its 2015 revenue growth of 10.8% YoY. This growth would mark a trend reversal after revenue growth fell for three consecutive years.

EBITDA growth

For the third quarter of 2017, EBITDA (earnings before interest, tax, depreciation, and amortization) is expected to grow 9.7% YoY to $238.7 million. For the fourth quarter, EBITDA is expected to grow 11.2% YoY to $191.2 million. For the third quarter, growth is mainly expected to be driven by revenue growth. EBITDA margins are expected to decline to 33.8% from 35.0% in 3Q16. For 4Q17, EBITDA margins are expected to remain flat at 29.7%. Combined with revenue growth, the airline should be able to record higher EBITDA growth.

This growth should lead to full-year 2017 EBITDA growth of 0.9% YoY to $795.5 million with an EBITDA margin of 30.2%—lower than the 33.9% margin recorded in 2016. The 2017 decline in EBITDA is a result of poor performance in the first half of 2017.

Earnings growth

For the third quarter, earnings are expected to fall 26.1% YoY to $0.92 per share due to a 15.6% YoY decline in net profit. Similarly, for 4Q17, earnings are expected to fall 32.9% YoY to $0.52 per share due to a 13.7% YoY decline in net profit.

For full-year 2017, earnings per share are expected to fall 25.4% YoY to $3.1 per share due to a 23.4% decline in net profits. The total number of shares outstanding for 2017 is expected to fall 1.2% to 69.6 million shares, a result of SAVE’s share buyback program.

Investors can gain exposure to Spirit Airlines by investing in the SPDR S&P Transportation ETF (XTN), which invests 2.6% of its portfolio in SAVE. It also invests 2.9% in Allegiant Travel (ALGT), 2.8% in American Airlines (AAL), and 2.7% in Southwest Airlines (LUV).

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