Spirit Airlines Disappoints With Wider-Than-Expected 2Q Loss

Grounding of flights amid the COVID-19 outbreak has weighed heavily on passenger airline companies, including Spirit Airlines (SAVE). The company’s adjusted loss of $3.59 per share fell considerably below analysts’ estimates of $2.66. Plus it compared unfavorably to the earnings of $1.69 per share in the year-ago period.

Spirit’s quarterly revenues plunged 86.3% year-over-year to $138.5 million but came ahead of analysts’ estimates of $108.4 million. The significant drop in its top-line reflects a plunge in passenger volumes. Second quarter capacity also declined 83.2% year-over-year.

Spirit’s President and CEO Ted Christie said “The COVID-19 pandemic negatively impacted our second-quarter results. However, we were encouraged by our June results and believe they illustrate that when leisure travel demand rebounds and stabilizes, our leading low-cost structure positions us well to be among the first to return to profitability.”

The company is still monitoring the impacts of COVID-19 on its operations and financials and therefore hasn’t provided an outlook for the third quarter. However, it anticipates capacity to decline by a further 32% in the current quarter.

On June 29, Goldman Sachs analyst Catherine O’Brien raised the price target on Spirit Airlines to $20 from $15 and retained the Buy rating. In a research note to investors, O’Brien said “Passenger volumes have begun to lift off the bottom seen in April, and improving trends in markets that have reopened is encouraging.”

Overall, the majority of analysts are sidelined on the stock with a Hold consensus. The average target price of $20.11 reflects an upside potential of 20.7% in the coming 12 months (See Spirit Airlines’ stock analysis on TipRanks).

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