Spirit Airlines Incorporated (NYSE: SAVE) is having a great day in the market today, and for good reason. The company announced increased guidance, exciting investors who are sending the stock on a run for the top. Today, we’ll talk about:
- The increased guidance;
- what we’re seeing from SAVE stock as a result; and
- what we’ll be watching for ahead.
SAVE Increases Guidance
As mentioned above, Spirit Airlines is having a great day in the market today after announcing an increase to its guidance. On Monday Afternoon, the company said that it expects for its revenue per seat mile grow dramatically. In fact, SAVE said that in the third quarter, it’s RASM rose by 5.5%. About a month ago, the company said that it expected for revenue per seat mile to climb by 6% in the fourth quarter. However, the story has changed.
In an update that was provided late on Monday, SAVE said that it now expects that its RASM will climb by 11% in the current quarter. There are a few factors that the company said would drive the increase:
- First off, the company said that its decision to dramatically price nonticket offerings like seat assignments and bags is paying dividends faster than expected.
- The company also pointed to route network changes and capacity adjustments that now better match supply and demand and are boosting the company’s load factor.
- Finally, air travel demand is improving as we enter peak periods.
At the same time as the RPSM is climbing, the company is benefiting from a lull in the value of oil. After a decent surge in prices, oil is starting to bottom out, leading to reduced costs. In fact, jet fuel is one of the largest expenses to airlines. So, the reduced fuel cost is a major benefit to SAVE and its competitors.
With this in mind, the company lowered its Q4 fuel cost guidance to $2.27 per gallon from its initial forecast of $2.46 per gallon. The company also reduced the high end on its non fuel unit costs guidance by about half a percentage point.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to work in the market is that the news leads to moves. When it comes to Spirit Airlines, the news proved to be overwhelmingly positive. After all, when we invest, we are doing so with the expectation of growth. With the announcement from the company in mind, growth is now expected to be achieved at a higher rate than previously expected. So, it’s no surprise to see that excited investors are sending the stock screaming for the top. As is normally the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (11:16), SAVE is trading at $59.24 per share after a gain of $8.26 per share or 16.20% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the iWatch Markets team will continue to keep a close eye on SAVE. In particular, we’re interested in following the story surrounding the company’s continued work to increase its revenue per seat mile while reducing expenses as it seems as though the company is doing a great job at the moment. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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