Will High Labor Costs Hurt Spirit's (SAVE) Q1 Earnings?
Zacks Investment Research | Apr 21, 2019 10:53PM ET
Spirit Airlines, Inc. (NYSE:SAVE) is expected to report first-quarter 2019 earnings numbers on Apr 25, before the market opens.
Last reported quarter, the company came up with in-line earnings but better-than-expected revenues. Also, the top and the bottom lines improved significantly year over year owing to a rise in non-ticket revenues and operating yields.
Let’s see how things are shaping up prior to the announcement.
Factors Likely at Play
Similar to the last few quarters, high labor costs are expected to hamper the company’s bottom-line growth in the first quarter as well. It anticipates non-fuel unit costs to rise approximately 2.5% in the quarter. The Zacks Consensus Estimate for non-fuel unit costs in the first quarter stands at 5.47 cents, higher than 5.33 cents reported in the first quarter of 2018.
Additionally, sluggish unit revenues might hurt the company’s top line in the soon-to-be-reported quarter. Earlier in the month, Spirit trimmed its total revenue per available seat miles (TRASM: a key measure of unit revenues) view as a result of lower-than-expected yields in March and higher capacity due to higher-than-expected completion factor. TRASM is now expected to increase approximately 4% year over year (past view was an increase of 5%) compared with 11.4% rise registered in the fourth quarter of 2018. The Zacks Consensus Estimate for TRASM in the first quarter stands at 8.79 cents, lower than 9.59 cents reported in the fourth quarter of 2018.
However, robust passenger revenues on the back of strong demand for air travel should boost the company’s overall results. Increase in non-ticket revenues are also anticipated to aid results. The consensus mark for non-ticket revenues in the first quarter is pegged at $440 million, up from $418 million reported in the previous quarter.
A low effective tax rate in the quarter should also drive the bottom line. Effective tax rate in the to-be-reported quarter is anticipated to be 22% compared with 24% in the first quarter of 2018.
Spirit Airlines, Inc. Price and EPS Surprise
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