Spirit Airlines Incorporated (NASDAQ:SAVE) has rallied 63% YTD to all-time high levels. While other major airlines such as Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL) have rallied 52% and 42%, respectively, Spirit Airlines Incorporated (NASDAQ:SAVE) may be grabbing market share from these major carriers. Several news releases from the company suggest that growth in the interim is possible for Spirit Airlines Incorporated (NASDAQ:SAVE).
Brief Fundamental Analysis
Spirit Airlines Incorporated (NASDAQ:SAVE), a $2.11 billion market capitalization company, is a regional airline operating routes in the U.S., the Caribbean and Latin America. It is trading with a P/E of 18.25, and a forward P/E of 11.47. Its PEG is 0.80, and its balance sheet carries no debt.
Delta Air Lines, Inc. (NYSE:DAL) is trading with a P/E of 17.77, and a forward P/E of 6.14. Its PEG ratio is 0.66, and the company is operating with a 2.43% profit margin. United Continental Holdings Inc (NYSE:UAL) is trading with a negative P/E and a forward P/E of 6.64. However, its profit margin is -1.86%. US Airways is trading with a P/E of 5.59, and a forward P/E of 5.95. Its PEG ratio is 0.09.
The company has announced an outstanding quarterly earnings report, which may be found here. The company increased its total operating revenues by 22.9% from $301 million for the three months ending in 2012 to $370 million for the same period in 2013. However, its total operating expenses rose by 21.4% from $264 million to $320 million, mainly due to higher aircraft fuel prices. Overall, its total revenue increase outpaced its operating expenses, and the company saw growth in its diluted earnings per share of 31.3% from $0.32 for 1Q 2012 to $0.42 in 1Q 2013.
Part of this awesome performance was due to an increase in its revenue passenger mile (RPM). Its RPM increased 21.3% from $2.19 billion in 1Q 2012 to $2.66 billion in 1Q 2013. Furthermore, its available seat miles (ASM) increased from 2.58 billion to 3.12 billion. ASM is the revenue-generating seats available for travelers to purchase.
Due to extraordinary performance and a solid business model, the company increased its operating margin from 12.6% in 1Q 2012 to 14.4% in 1Q 2013. This should bring provide investors with confidence about the outstanding performance of Spirit Airlines Incorporated (NASDAQ:SAVE).
On the other hand, Delta Air Lines, Inc. (NYSE:DAL), United Continental Holdings, and US Airways Group Inc (NYSE:LCC) did not fare as well. Delta Air Lines increased its revenue by 1% from $8.41 billion in 1Q 2012 to $8.50 billion in 1Q 2013. Its net income declined 94% from $124 million ($0.15 EPS) to $7 million ($0.01 EPS) for the same period.
United Continental Holdings Inc (NYSE:UAL) increased its revenue by 1.4% from $8.60 billion in 1Q 2012 to $8.72 billion in 1Q 2013. Due to less costs of operation, the company’s net loss narrowed from a loss of $448 million (or 1.36 EPS) to a loss of $417 million (or 1.26 EPS). The company significantly improved its operations, but because it is still losing cash, I do not recommend taking a long position United Continental.
US Airways Group Inc (NYSE:LCC) reported an increase of revenue from $3.26 billion to $3.38 billion for the same period. However, due to a 2.2% increase of its operational costs, the company’s net income declined 8.3% from $48 million ($0.28 EPS) to $44 million (0.26 EPS).
Spirit Airways’ performance for 1Q 2013 was better in comparison to other major airlines, and it should provide further confidence to investors about the solid business model of this carrier.
Expansion of Spirit Airways
The company has announced the inauguration of nine nonstop routes starting April 25, 2013, and four starting in June 2013. The press release may be accessed here.
Dallas/Fort Worth (DFW) – Cancun, Mexico (CUN)
Dallas/Fort Worth (DFW) – Los Angeles (LAX)
Dallas/Fort Worth (DFW) – Oakland/San Francisco (OAK)
Philadelphia (PHL) – Las Vegas (LAS)
Philadelphia (PHL) – Myrtle Beach (MYR)
Baltimore/Washington (BWI) – Myrtle Beach (MYR)
Baltimore/Washington (BWI) – Las Vegas (LAS)
Houston (IAH) – Los Angeles (LAX)
Denver (DEN) – Minneapolis/St. Paul (MSP)
The list describes the nine nonstop routes that were inaugurated in April, 2013. The company may take significant market share from American Airlines, since Dallas/Fort Worth International Airport is its largest hub. Furthermore, the company is positioned to take market share from US Airways Group Inc (NYSE:LCC) because Philadelphia International Airport is the company’s third major hub. In addition, market share from United Continental Holdings may migrate towards Spirit Airways since the company inaugurated a route from the International Airport of Houston to Los Angeles International Airport. Spirit Airways is scheduled to begin flying from IAH to Denver and Detroit, which could significantly impact United Continental’s operations on these routes.
Tthe indicator of company growth may be observed in the hiring of new workers, and Spirit Airways is hosting open houses for new flight attendant jobs in Chicago. The company plans to open a new base at Chicago O’Hare International Airport, which will be home to over 140 crewmembers, including pilots, flight attendants, and mechanics. This gesture indicates that the company is confident that its revenue-generation ability will increase in the interim.
The bottom line
Spirit Airlines Incorporated (NASDAQ:SAVE) should have a bright future, and its share price should soar to higher altitudes. According to the last earnings report, the company may be taking market share that belonged to major carriers such as Delta Air Lines and United Continental Holdings. What’s more is that the company is expanding through the operation of new nonstop routes from major hubs such as DFW and IAH. Furthermore, the company’s hiring of new flight attendants shows that it is confident in its growth ability in the interim. Due to these aggressive growth strategies, I believe Spirit Airlines should be considered as a long position.
The article Will Spirit Airlines Fly Higher? originally appeared on Fool.com and is written by Robinson Roacho.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.