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Virgin America (VA) reported third-quarter earnings that easily beat estimates and the carrier guided toward strong performance in the current quarter, when it will boost capacity by around 10%.

Excluding items, the carrier reported third-quarter net income of $73 million, or $1.64 a share. Analysts surveyed by Thomson Reuters had estimated $1.56. Revenue rose 1.3% to $411 million. Analysts had estimated $406 million. Operating margin was 18.2%.

Virgin America shares fell 4.5% in trading Thursday.

Looking ahead, Virgin America will take delivery of two A320 aircraft during the current quarter, leading to a capacity increase between 9.5% and 10.5%. The carrier expects current quarter passenger revenue per available seat mile, or PRASM, to decline between 3% and 5%, while CASM excluding fuel and special items would increase between 2% and 3%.

Stifel analyst Joseph DeNardi wondered about the carrier's expectation that its current quarter PRASM will outperform the industry despite the significant capacity increase.

"The commentary around outperforming industry PRASM despite growing ASMs at 15% next year is likely to encourage those bullish on the stock; however, we remain skeptical of this and suggest there is risk that the company may be over-promising, " DeNardi wrote in a note issued Thursday morning. He has a hold on the shares.

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Meanwhile, Cowen & Co. analyst Helane Becker wrote, "We believe the shares will modestly outperform the industry today given the better than expected 3Q15 results." Becker has a $39 price target and a market perform rating on the shares.

Deutsche Bank analyst Mike Linenberg has a buy on Virgin America and a $44 price target. "Overall, this guidance implies upside risk to our current Dec Q operating margin forecast of 13%, which represents solid improvement from last year's 9.2% result," Linenberg wrote Thursday.

During the third quarter, PRASM decreased 2.7% to 11.05 cents, driven by a 1.0 point decrease in load factor and a 1.8% decrease in yield. Total RASM decreased 1.6%.

On the cost side, cost per available seat mile excluding special items and fuel rose 11% to 7.34 cents, reflecting increases in salaries, wages, benefits, landing fees and other items.

Capacity grew 3%, primarily reflecting the delivery of two Airbus A320 aircraft. During the quarter the carrier said it would end service between Dallas Love Field and Austin on Nov. 30, and begin service to Las Vegas on Dec. 1.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.