"Airlines show 23% average upside potential on an aggressively conservative approach to modeling fuel benefits. Our upside case, which assumes fuel stays low through 2016 with much more limited revenue offset, shows about 65% upside to coverage," analysts said.
"Fundamentally, the U.S. airlines stand to see about $10 billion decline in fuel costs in our 2015 outlook. We can debate how much will flow fully to earnings, but the potential remains substantial put against our $14.5 billion pre-tax earnings estimate for 2014," analysts noted.
"If oil stays low, we think the industry would 'need' to grow fleet," analysts said, adding, "Our best ideas are SAVE, followed by American Airlines Group (AAL) and United Continental Holdings (UAL) ."
Separately, TheStreet Ratings team rates SPIRIT AIRLINES INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate SPIRIT AIRLINES INC (SAVE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SPIRIT AIRLINES INC has improved earnings per share by 8.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SPIRIT AIRLINES INC increased its bottom line by earning $2.43 versus $1.50 in the prior year. This year, the market expects an improvement in earnings ($3.25 versus $2.43).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Airlines industry average. The net income increased by 9.7% when compared to the same quarter one year prior, going from $61.10 million to $67.00 million.
- SAVE's revenue growth trails the industry average of 30.4%. Since the same quarter one year prior, revenues rose by 13.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SAVE's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SAVE has a quick ratio of 1.56, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly increased by 57.88% to $62.16 million when compared to the same quarter last year. In addition, SPIRIT AIRLINES INC has also vastly surpassed the industry average cash flow growth rate of -5.21%.
- You can view the full analysis from the report here: SAVE Ratings Report