Shares of discount airline Spirit Airlines (NYSE:SAVE) popped as much as 10% in early trading Thursday before retracing to about a 9.1% gain as of 2 p.m. EDT. The move appears to have been sparked by an "investor update" filed with the SEC this morning.
Spirit advised that it expects sales for its fiscal second quarter 2018 to come in "more than $10 million higher than the mid-point of our implied guidance." Also, "adjusted cost per available seat mile excluding fuel ... is expected to be down approximately 11 percent year over year, better than our previous guidance of down 7.5 to 8.5 percent," which would imply higher profits earned on those greater-than-expected revenues.
To put those predictions in context, last quarter Spirit guided investors to expect "revenue to decline 6.5% to 7.5% this quarter," with pre-tax profit margins declining to perhaps 9%. These predictions led Foolish airlines analyst Adam Levine-Weinberg to warn that "profitability will continue to plunge rapidly" unless Spirit does something to right the ship.
Now it appears that Spirit is doing something. Revenue could consequently exceed analyst targets for $848 million for the quarter -- perhaps coming in closer to $860 million. Profits, currently expected to be about $0.92 per share, could likewise arrive higher than expected -- albeit still lower than what Spirit earned in the year-ago quarter.
Investors are positioning themselves to profit from an "earnings beat," and we'll find out if they guessed correctly when Spirit Airlines reports its Q2 results on July 26.