Why Spirit Airlines Shares Are Flying Higher at Today's Opening Bell

Spirit Airlines (Spirit)Airlines ) (NYSE: SAVE)The company updated its first-quarter guidance a few weeks before announcing its final results. The announcement seems to have fueled speculation among Spirit Airlines investors, as the stock price soared 131 TP3T at the opening bell on Monday, then dropped back down and was up 31 TP3T as of 1:30 p.m.

Routine Announcement Leads to Sharp Price Surge

Spirit Airlines' shareholders have experienced a lot of turmoil in recent years. Heading into 2024, the company hopes to complete the sale toJetBlue Airways CorporationHowever, in March this year, the two sides canceled the deal due to the opposition of the monitoring body.

The termination of the transaction has left Spirit to face some significant difficulties on its own, includingRTX Flight disruptions caused by engine problems.

On Monday, Spirit Airlines said it expects to receive between $150 million and $200 million from RTX for engine problems, cash that will help improve the airline's liquidity. The cash will help improve the airline's liquidity. However, the accounting for these payments will temporarily depress margins and slightly affect quarterly results.

Spirit said it now expects first-quarter adjusted operating margins of minus 14.5% to minus 13.5%, compared to its previous forecast of minus 15% to minus 12%. Revenue should be around US$1.265bn, which is in line with its previous forecast of US$1.25bn to US$1.28bn in sales. The airline plans to release final first-quarter figures in early May.

It seems unlikely that this update should have caused an overreaction in the share price, as Spirit Airlines shares actually fell in pre-ban trading after the update was released. However, the update generated a great deal of speculation on social media that it was a precursor to the announcement of a new name agreement, leading to a surge in the share price.

Is Spirit Airlines worth buying as we enter the earnings period?

It is certainly possible that a new deal will be struck. Before JetBlue stepped inFrontier Group Holdings) has attempted to acquire Spirit Airlines and remains a reasonable郃 partner. However, there is no indication that Frontier Group is focused on a deal, and the operating environment in the airline industry has become more treacherous in the last few quarters since the initial interest.

More than likely, Spirit will have to resonate with these engine failures and financial problems while taking on a huge amount of debt on its own.

Investors interested in buying Carburetor speculation need to be aware that without an acquisition, Spirit Airlines stock will be hard to get up in the air anytime soon.

Should you invest $1,000 in Spirit Airlines now?

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Lou Whiteman does not own any of the shares mentioned above.The Motley Fool recommends RTX.The Motley Fool has a disclosure policy.

Why Spirit Airlines Stock Is Flying Higher at Today's Rock Opening was originally published by The Motley Fool.