Spirit Airlines' 1Q16 Earnings Analysis: What’s in Store for 2016?
Analyst estimates
For 2Q16, Spirit Airlines’ sales are expected to grow by 7.6% to $595 million. Sales growth is expected to accelerate to 9.4% and 10.9% in 3Q16 and 4Q16. This will lead to full-year 2016 revenue growth of 9.2% to $2,339 million.
However, EBITDA margins are expected to decline going forward. For 2Q16, 3Q16, and 4Q16, analysts are expecting margins to decline to 26%, 27%, and 22%, respectively. This will lead to full-year 2016 EBITDA margins of 24.8% as compared to 27.2% in 2015.
Given the expected margin decline, analysts are estimating EBITDA (or earnings before interest, tax, depreciation, and amortization) to decline by ~0.7% to $579 million for the full year 2016. However, for 2Q16, EBITDA is expected to grow by 12%, followed by a 3% decline in 3Q16 and a 11% decline in 4Q16.
Analyst recommendations
Of the 15 analysts rating the stock, 80% have a “buy” rating, and 20% have a “hold” rating.
Target price
The stock’s consensus 12-month target price is $57.79, which indicates a 21.8% return potential as of April 26, 2016. Analysts’ 12-month target prices for SAVE’s peers are as follows:
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American Airlines (AAL): $47.5 with a 24% return potential
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Delta Air Lines (DAL): $62.79 with a 41% return potential
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JetBlue Airways (JBLU): $27.04 with a 32% return potential
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United Continental (UAL): $67.50 with a 33% return potential
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Southwest Airlines (LUV): $56.27 with a 19% return potential
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Alaska Air Group (ALK): $90.82 with a 18% return potential
Investors can get exposure to airline stocks by investing in the iShares Transportation Average ETF (IYT), which invests ~21% of its portfolio in airlines. Next, we’ll wrap up this series by looking at SAVE’s valuation compared to peers.
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