On Tuesday, Spirit Airlines (NYSE:SAVE) saw its price target lowered to $4 from the previous $5, while its stock rating remained at Hold. The adjustment by TD Cowen reflects updated first quarter and full-year 2024 estimates, taking into account the latest guidance from Spirit's management.
The airline is expected to receive compensation from Pratt & Whitney's International Aero Engines (IAE) amounting to $150-200 million, which will be distributed as monthly credits. However, due to accounting guidance, the recognition of these credits in the profit and loss statement will be delayed, leading to a 300 basis point impact on EBIT margins.
Spirit Airlines also anticipates that pre-delivery payments (PDPs), net of refunds, will generate approximately $170 million in cash. This is considered a significant source of liquidity for the company. Despite the impact of the credits, the airline's operational expenses, excluding these credits, are projected to align with prior guidance. Notably, Spirit is performing well in terms of labor and landing fees, which are key components of operational costs.
The revision of the price target by TD Cowen takes into account these financial updates and the expected compensation from IAE. Spirit Airlines' stock will continue to be monitored by investors as the company navigates through its financial forecasts and operational performance.
InvestingPro Insights
In light of TD Cowen's recent price target adjustment for Spirit Airlines, current InvestingPro data and tips offer further context for investors. With a market capitalization of $487.18 million, Spirit operates under significant financial scrutiny. The airline's Price / Book multiple stands at a low 0.43 as of the last twelve months ending Q4 2023, which may catch the eye of value investors. Additionally, a noteworthy dividend yield of 25.42% as of the latest data suggests that despite its challenges, Spirit is committed to returning value to shareholders.
InvestingPro Tips highlight that Spirit Airlines is trading at a low Price / Book multiple and pays a significant dividend to shareholders. These factors could be particularly relevant for investors seeking opportunities in undervalued stocks with a potential income stream. However, given the airline's significant debt burden and the anticipation that it will not be profitable this year, caution is warranted. The company's stock has also experienced high price volatility, with a 70.4% decline in the one-year price total return, which speaks to the risks involved.
For investors looking to dive deeper into Spirit Airlines' financial health and future prospects, InvestingPro provides additional insights and tips. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of analytical tools and expert insights that can help guide your investment decisions.
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