Shares of Spirit Airlines SAVE have appreciated 28.4% in the past seven days, outperforming its industry’s 10.8% increase.
The price performance is no doubt very impressive in these coronavirus-ravaged times. Lets delve into the details to unearth the reasons for this outperformance.
Spirit Airlines presented a rosy picture at an investor presentation. Management stated that its low-cost structure has enabled it to withstand the current coronavirus-led crisis. The average daily cash burn rate of $4 million is expected to improve in the second half of 2020. In a bid to preserve cash, the carrier reduced the current-year planned gross capital expenses by $235 million.
To bolster its liquidity position, the carrier sealed a deal with the U.S. treasury Department for a payroll support of approximately $335 million (of the total amount, grants worth $264 million are not required to be paid back while a $71-million fund is obtained in unsecured low-interest loan) under the CARES Act. Low fuel costs are also providing a cushion to the bottom line. Notably, average fuel cost per gallon declined 13.4% in the March quarter to $1.81.
Moreover, Spirit Airlines gained traction from the recent positive vibes surrounding this sector, which has been hit hard by the coronavirus pandemic. Notably, booking trends have been improving. Moreover, there has been an uptick in air travel in the United States since the Memorial Day weekend.
Data from Transportation Security Administration (TSA) shows that 340,769 passengers went through TSA checkpoints on the Memorial Day. Although the figure represents an 86.4% plunge from the year-ago number, it indicates a more than 100% surge from the lows in April.
Zacks Rank & Key Picks
Spirit Airlines carries a Zacks Rank #3 (Hold). Better-ranked stocks in the transportation sector include Frontline Limited FRO, Scorpio Tankers ( STNG and Ryanair Holdings RYAAY. While Frontline and Scorpio Tankers sport a Zacks Rank #1, Ryanair carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
At Frontline, the Zacks Consensus Estimate for current-quarter earnings surged 30.7% in the past 60 days.
At Scorpio Tankers, the Zacks Consensus Estimate for current-quarter earnings soared more than 100% in the past 60 days.
Ryanair’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 62.7%.
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Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
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