- The company beat earnings yet again.
- This only confirms our thesis that Spirit is one of the best buys in the airline industry.
- Per our initial article, we felt that the margin expansion and earnings growth the company is seeing would materialize.
Spirit Airlines (NASDAQ:SAVE) is down 3% since announcing 2Q earnings. The company has beat earnings in each of the last four quarters. It posted EPS of $0.91 (compared to $0.90 consensus expectations) and revenues also beat, although marginally.
During 2Q, its pre-tax margin jumped to 21.3%, a 350 basis point improvement y/y. And total revenue per available seat mile rose nearly 5%. Shares are up right at 9% since we first profiled Spirit in March. It's still 9% below our initial $71 price target. We noted then:
Spirit can also upsell to higher margin services. Right now, the spread from ticket revenue to total passenger revenue, is mainly bag fees and other convenience fees. However, there is a big opportunity to increase ancillary revenues...Higher ancillary revenue brings the opportunity to lower fare prices, which increases traffic and provides a greater opportunity to upsell to higher margin revenues.
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