Spirit Airlines (SAVE) reported first quarter 2013 earnings on Tuesday that were better that expected. Revenue for the quarter was approximately 370 million dollars, 1 percent above estimates of 366 million and an increase of 23 percent YOY. Additionally, revenue per available seat mile (RASM) was up 170 basis points year over year but approximately 150 basis points of that was a result of Easter falling in March this year rather than in April. EPS also grew in the quarter, up 38 percent yoy to .45, on higher margins as a result of lower fuel costs over the quarter. This beat analyst consensus of .42 by about 6 percent. The stock traded higher about 4.5 percent on the news.
Moving forward, we still see strong growth potential of Spirit Airlines. Currently management is looking to expand into about 400 markets, and with the lowest fare prices in the industry, is poised to capture market share when it moves into these areas. Additionally, we expect margins to continue to increase as revenue per available seat mile increases, while at the same time cost per available seat mile decreases. EBITDA margin expanded 180 basis points for the quarter and we expect similar expansion to occur for the year. Also, as Spirit continues to get deliveries for its new Airbus A320's, costs should decline as these planes are about 15 percent more fuel efficient then the older A319's. As a result we reiterate our BUY rating on Spirit Airlines, with an updated 2013 price target of $33.80.