Frontier downgraded to In Line at Evercore ISI on ‘persistently weak’ margins

Evercore ISI downgraded Frontier Group (ULCC) to In Line from Outperform with a $7 price target. The firm, which is adjusting estimates for its airline coverage based on recent conference commentary and higher fuel costs beyond Q3, notes that revenue updates were “broadly in-line with our estimates,” with Frontier and Spirit Airlines (SAVE) the “outliers to the downside.” However, Evercore does not view Frontier as “a canary,” given numerous execution challenges. Despite sharp underperformance of the shares, the firm is moving to the sidelines given persistently weak relative margins and the largest implied variance to Q3 revenue and margin outlook compared to the firm’s prior estimates, Evercore tells investors.