Spirit Airlines (SAVE) is performing impressively at the moment. Also, we are optimistic about the company’s prospects and believe that the time is right for investors to add the stock to their portfolio.
Let’s take a closer look at the factors that make this Zacks Rank #2 (Buy) stock a compelling choice for investors right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
An Outperformer: Spirit Airlines has outperformed its industry over the past three months. The stock has gained 11% compared with the industry’s 8.5% growth.
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Earnings Estimates Moving North: Annual estimates for Spirit Airlines have been northbound over the past 60 days, reflecting analysts’ confidence in the stock. Over this period, the Zacks Consensus Estimate for current-year earnings climbed 1.9% to $4.86 per share. For 2020, the same moved up 2.9% to $4.93 per share over the same time frame.
Given the wealth of information at their disposal, it is in the best interest of investors to be guided by broker advice and the direction of their estimate revisions. This is because the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Decent Earnings Surprise History: Spirit Airlines has not lagged the Zacks Consensus Estimate for earnings in any of the past four quarters. In fact, the low-cost carrier has outpaced the Zacks Consensus Estimate in two of the past four quarters.
Tailwinds: Spirit Airlines, like most other airline players including Hawaiian Holdings HA, Alaska Air Group ALK and JetBlue Airways JBLU, is being aided by lower fuel costs. Average economic fuel cost per gallon declined 7.5% year over year to $2.11 for Spirit Airlines in the first nine months of 2019. The company expects fuel costs to decline to $2.09 per gallon in the December quarter compared with $2.26 reported in fourth-quarter 2018.
Moreover, Spirit Airlines is being aided by robust passenger revenues on the back of strong demand for air travel. Passenger revenues, accounting for a majority of the top line, increased 16.3% year over year in the first nine months of 2019. The carrier's efforts to modernize its fleet also raise optimism. The fleet strength at the end of 2018 stood at 128, up from 112 at the end of 2017. For 2019, the company expects the fleet size to expand to 145.
Bullish Industry Rank: The industry, to which Spirit Airlines belongs, currently has a Zacks Industry Rank of 31 out of 250 plus groups (top 12%). Studies have shown that 50% of a stock's price movement is directly related to the performance of the industry it belongs to.
In fact, an average stock in a strong group is likely to outperform a great stock in a poor industry. Therefore, taking the industry’s performance into account becomes necessary.
Style Scores: In addition to a top Zacks Rank and a favorable industry rank, the stock has a Value Score and Momentum Score of A each.
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