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Analysts Expect Spirit Airlines’ Q4 Earnings to Rise 89%

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Fourth-quarter expectations

Spirit Airlines (SAVE) is scheduled to report its fourth-quarter earnings results next week. The company has an impressive record of beating analysts’ earnings estimates. Spirit Airlines has beat analysts’ earnings estimates in the past eight quarters with an average surprise of 3.6%. Spirit Airlines might continue its trend of reporting better-than-expected bottom-line results and witness strong quarterly earnings growth in the fourth quarter.

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For the fourth quarter, analysts expect an adjusted EPS of $1.38 for Spirit Airlines, which implies a rise of 89% YoY (year-over-year). Analysts expect increased revenues and cost-cutting initiatives to drive the company’s fourth-quarter earnings higher. The revenues are expected to rise 29.2% YoY to $861.8 million due to the strong travel demand environment, better pricing, and higher baggage and other fees.

Major US air carriers (IYT) including United Airlines (UAL), Southwest Airlines (LUV), Delta Air Lines (DAL), and American Airlines (AAL) reported a 72%, 52%, 35.4%, and 11.8% increase in their respective fourth-quarter adjusted EPS.

Management’s guidance

On January 16, Spirit Airlines’ management updated its fourth-quarter outlook. The company raised the forecast for key revenue metrics and lowered the guidance for the fuel cost per gallon. The company expects its fourth-quarter TRASM (total revenue per available seat mile) to increase 11.4% YoY instead of the previous projection of 11% growth.

The upbeat guidance is mainly due to higher non-ticket revenues and a rise in load factor expectations. Spirit Airlines expects the strong travel demand environment during the peak travel periods of Thanksgiving and Christmas to drive its TRASM higher in the fourth quarter.

Management thinks that the company’s dynamic pricing strategy on non-ticket items like seats, bags, and bundled service offerings is paying off much faster than expected and driving higher non-ticket revenues. The airline’s route re-alignment and capacity matching strategies have resulted in a better-than-expected improvement in load factors.

Spirit Airlines expects its fourth-quarter cost per available seat mile, excluding fuel, to increase at the high end of its earlier guidance range of 5%–5.5%. However, the company reduced the fuel cost per gallon expectation by $0.01 to $2.26.

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