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Can Spirit Airlines Keep the Earnings Surprise Streak Alive?

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First-quarter expectations

Spirit Airlines (SAVE) is scheduled to report its first-quarter results on April 25. The airline has an impressive record of beating earnings estimates. The company has beat analysts’ earnings estimates in the past nine quarters with an average surprise of 3.2%. Spirit Airlines registered over 50% bottom-line growth in the previous two quarters.

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Analysts’ estimates for the first quarter suggest that the company might continue its trend of an upbeat bottom-line performance and register strong quarterly earnings growth. For the first quarter, analysts expect an adjusted EPS of $0.84 for Spirit Airlines, which implies a rise of 90% YoY (year-over-year).

Analysts expect increased revenues, cost-cutting measures, and lower fuel costs to drive Spirit Airlines’ first-quarter earnings higher. The company’s first-quarter revenues are expected to rise 21.6% YoY to $856.1 million due to the healthy travel demand environment during the start of the quarter, improved pricing, and higher baggage and other fees.

Delta Air Lines (DAL) and United Airlines (UAL) are the only two major US air carriers (IYT) that have reported their first-quarter results. Their adjusted EPS rose 28% and 130%, respectively, YoY. American Airlines (AAL), which is scheduled to report its results on April 26, will likely witness a decline of 32.4% YoY in its first-quarter profits.

Management’s guidance

On April 10, Spirit Airlines updated its first-quarter outlook. The company lowered its unit revenue growth guidance by 100 basis points due to overcapacity and lower-than-expected yields in March. The company’s updated unit revenue growth outlook remained strong at 4%. At this growth rate, the airline’s unit revenues will likely increase to 8.70 cents from 8.37 cents in the first quarter of 2018.

The adjusted operating expenses ex-fuel per available seat mile will likely increase 2.5% YoY to 5.46 cents from 5.33 cents in the first quarter of 2018. The company expects the economic fuel cost per gallon to fall 2.8% YoY to $2.09 from $2.15.

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