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Here's Why You Should Retain Spirit Airlines (SAVE) Stock Now
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Spirit Airlines’(SAVE - Free Report) transformation initiatives are commendable. The company’s efforts to upgrade and expand its fleet are also praiseworthy. However, SAVE is grappling with elevated operating expenses and weak liquidity.
Factors Favoring SAVE
In the second quarter of 2024, Spirit Airlines initiated a transformation plan to better align with market dynamics. The introduction of diverse travel options, ranging from premium to budget-friendly, reflects the company's commitment to offering a more personalized and flexible experience for all travelers.
Enhancements like priority check-in, improved boarding and guest-friendly policies demonstrate a clear focus on customer satisfaction and operational efficiency. This move not only aims to attract a broader audience but also positions Spirit to compete more effectively in a dynamic travel industry.
Spirit is set to achieve $100 million in annual cost savings, with $75 million expected by the end of the year 2024. Key initiatives include pausing recruitment, offering unpaid leaves, reducing overhead, furloughing pilots and realigning its network by exiting 42 markets and entering 77 new ones.
SAVE's efforts to expand and modernize its fleet are commendable. The company added eight new A320neo and A321neo aircraft, retired five A319ceo planes and ended the June quarter with 210 aircraft.
Spirit Airlines secured $37.2 million in AOG credits from Pratt & Whitney and recorded $7.1 million in credits. The company expects an average of 20 AOG aircraft in 2024 and plans to negotiate further arrangements after Dec 31, 2024.
Key Risks
Escalated operating expenses are adversely impacting Spirit Airlines’bottom line. This surge in operating expenses is primarily driven by the increase in labor costs and fuel costs.
In the second quarter of 2024, labor costs, comprising salaries and benefits (accounting for 29.2% of the total operating expenses), rose by 2.6% year over year to $418.4 million, and fuel costs surged by 4.2% year over year. The average fuel cost per gallon was pegged at $2.78, indicating a 6.1% year-over-year increase. The average fuel cost per gallon is expected to be $2.65 in the September quarter.
Spirit Airlines exited the second quarter of 2024 with a current ratio (a measure of liquidity) of 0.94, raising liquidity concerns. A current ratio of less than 1 indicates that the company does not have enough cash to meet its short-term obligations. Moreover, Spirit Airlines’high capex raises concerns as ahigh capex value in times of revenue weakness, as is the case with the company, is not desirable.
Shares of SAVE have decreased 83% over the past year compared to its industry’s growth of 20.1% in the same period.
Image Source: Zacks Investment Research
Zacks Rank
SAVE currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Westinghouse Air Brake Technologies (WAB - Free Report) .
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have risen 8.4% in the past year.
WAB holds a Zacks Rank #2 (Buy) at present and has an expected earnings growth rate of 26% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 11.8%. Shares of WAB have climbed 45.6% in the past year.
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Here's Why You Should Retain Spirit Airlines (SAVE) Stock Now
Spirit Airlines’(SAVE - Free Report) transformation initiatives are commendable. The company’s efforts to upgrade and expand its fleet are also praiseworthy. However, SAVE is grappling with elevated operating expenses and weak liquidity.
Factors Favoring SAVE
In the second quarter of 2024, Spirit Airlines initiated a transformation plan to better align with market dynamics. The introduction of diverse travel options, ranging from premium to budget-friendly, reflects the company's commitment to offering a more personalized and flexible experience for all travelers.
Enhancements like priority check-in, improved boarding and guest-friendly policies demonstrate a clear focus on customer satisfaction and operational efficiency. This move not only aims to attract a broader audience but also positions Spirit to compete more effectively in a dynamic travel industry.
Spirit is set to achieve $100 million in annual cost savings, with $75 million expected by the end of the year 2024. Key initiatives include pausing recruitment, offering unpaid leaves, reducing overhead, furloughing pilots and realigning its network by exiting 42 markets and entering 77 new ones.
SAVE's efforts to expand and modernize its fleet are commendable. The company added eight new A320neo and A321neo aircraft, retired five A319ceo planes and ended the June quarter with 210 aircraft.
Spirit Airlines secured $37.2 million in AOG credits from Pratt & Whitney and recorded $7.1 million in credits. The company expects an average of 20 AOG aircraft in 2024 and plans to negotiate further arrangements after Dec 31, 2024.
Key Risks
Escalated operating expenses are adversely impacting Spirit Airlines’bottom line. This surge in operating expenses is primarily driven by the increase in labor costs and fuel costs.
In the second quarter of 2024, labor costs, comprising salaries and benefits (accounting for 29.2% of the total operating expenses), rose by 2.6% year over year to $418.4 million, and fuel costs surged by 4.2% year over year. The average fuel cost per gallon was pegged at $2.78, indicating a 6.1% year-over-year increase. The average fuel cost per gallon is expected to be $2.65 in the September quarter.
Spirit Airlines exited the second quarter of 2024 with a current ratio (a measure of liquidity) of 0.94, raising liquidity concerns. A current ratio of less than 1 indicates that the company does not have enough cash to meet its short-term obligations. Moreover, Spirit Airlines’high capex raises concerns as ahigh capex value in times of revenue weakness, as is the case with the company, is not desirable.
Shares of SAVE have decreased 83% over the past year compared to its industry’s growth of 20.1% in the same period.
Image Source: Zacks Investment Research
Zacks Rank
SAVE currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Westinghouse Air Brake Technologies (WAB - Free Report) .
C.H. Robinson Worldwide currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. CHRW has an expected earnings growth rate of 25.5% for the current year.
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have risen 8.4% in the past year.
WAB holds a Zacks Rank #2 (Buy) at present and has an expected earnings growth rate of 26% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 11.8%. Shares of WAB have climbed 45.6% in the past year.