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What to Expect from Spirit Airlines (SAVE) in Q2 Earnings?

Florida-based Spirit Airlines SAVE is scheduled to report second-quarter 2017 results on Jul 27, before the opening bell.

In the first quarter, the company came up with a positive earnings surprise of 4.08%. Moreover, its earnings surpassed the Zacks Consensus Estimate in each of the previous four quarters, with an average beat of 4.69%.

Let’s see how things are shaping up for this announcement.

Factors Likely at Play

We expect Spirit Airlines’ second-quarter results to be hurt due to the dispute with its pilots in May, this year.  Consequently, the carrier had to cancel multiple flights resulting in customer dissatisfaction. Additionally, passenger related issues have hurt other the US carriers like Delta Air Lines DAL and United Continental Holdings UAL, of late.

As a result of the disruption in its services caused by the dispute, the company had to incur costs pertaining to passenger re-accommodation and other factors. In fact, due to these costs Spirit Airlines expects cost per available seat miles, excluding fuel (CASM), to increase in the band of 9.5% to 10.5% on a year-over-year basis, which is much higher than the comparable figure recorded in the previous quarter.

The rising fuel costs might also limit bottom-line growth at Spirit Airlines in the quarter. Fuel cost per gallon (economic) is projected at $1.64 per gallon in the second quarter. Spirit Airlines expects total revenue per available seat miles (TRASM) to increase approximately 5.5% in the quarter. Also, capacity is projected to increase 13.6% on a year-over-year basis.

Spirit Airlines, Inc. Price and EPS Surprise


Spirit Airlines, Inc. Price and EPS Surprise | Spirit Airlines, Inc. Quote

Earnings Whispers

Our quantitative model does not conclusively show an earnings beat for Spirit Airlines this quarter. This is because a stock needs to have combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase its odds of an earnings surprise. However, this is not the case as highlighted below.

Zacks ESP: Spirit Airlines has an Earnings ESP of -0.90% as the Most Accurate estimate of $1.10 per share is pegged at a penny below the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Spirit Airlines currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) while going into an earnings announcement, especially when the company is seeing negative estimate revisions.

A Stock to Consider

With Spirit Airlines likely to disappoint, investors interested in the airline sector may consider American Airlines Group, Inc. AAL, since our model shows that it possess the right combination of elements to post an earnings beat in its next release.

American Airlines has an Earnings ESP of +2.19% and a Zacks Rank #1. The company is slated to release its second-quarter 2017 results on Jul 28.

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Delta Air Lines, Inc. (DAL): Free Stock Analysis Report
United Continental Holdings, Inc. (UAL): Free Stock Analysis Report
Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report
American Airlines Group, Inc. (AAL): Free Stock Analysis Report
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