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Analyzing Spirit Airlines’ Q4 Earnings

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Feb. 6 2019, Published 8:03 a.m. ET

Fourth-quarter results

On February 5, Spirit Airlines (SAVE) reported strong fourth-quarter results. The company’s top and bottom line increased significantly on a YoY (year-over-year) basis. Spirit Airlines’ earnings and revenues met analysts’ estimates.

Spirit Airlines’ fourth-quarter adjusted EPS of $1.38 was in line with analysts’ expectations and increased 89% YoY. Strong revenue growth and efficient cost management mainly drove the company’s fourth-quarter earnings.

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The company’s fourth-quarter revenues increased 29.5% YoY to $862.8 million—slightly higher than analysts’ expectations of $861.8 million. An increase in the unit revenue and strong growth in non-ticket sources drove Spirit Airlines’ fourth-quarter revenues higher. Spirit Airlines’ unit revenues for the quarter rose 11.4% due to strong travel demand, network realignment, a better yield, and non-ticket revenues.

During an update on the fourth-quarter outlook on January 16, Spirit Airlines’ management said that its dynamic pricing strategy on non-ticket items like bags, seats, and bundled service offerings is paying off faster than expected, which is driving higher non-ticket revenues. The company’s capacity matching and route re-alignment strategies have resulted in improved load factors.

Spirit Airlines’ ex-fuel CASM (cost per available seat mile) increased 5.6% YoY to 5.49 cents due to higher salaries and wages. Aircraft fuel expenses rose 31.1% due to a 14.7% increase in the fuel cost per gallon and a 14.4% rise in fuel consumption.

Higher revenues and efficient cost management drove Spirit Airlines’ pre-tax income and margin. The company’s adjusted pre-tax income grew 57.8% YoY to $124.2 million. The margin expanded by 260 basis points to 14.4%.

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

Fiscal 2018 performance

For fiscal 2018, Spirit Airlines reported an adjusted EPS of $4.40, which was in line with analysts’ expectation an increased 32.1% YoY. The company’s revenues of $3.32 billion met analysts’ estimate and increased 25.5% YoY. Spirit Airlines’ ex-fuel CASM fell 3.8% due to its cost-control measures and fleet transformation initiatives.

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