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Frontier Group Holdings (ULCC)
NASDAQ:ULCC
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Frontier Group Holdings
(NASDAQ:ULCC)74Outperform
Positive Factors
Financial Performance
Frontier 2.0 continues to gain traction, pointing to meaningful upside to consensus estimates.
Operational Initiatives
Frontier Airlines’ operational initiatives, such as increasing its premium cabin capacity, pivoting onto more profitable routes and continuing to generate sale/leaseback gains, should support ongoing improvements in margins and earnings.
Negative Factors
Debt and Financial Risks
Downside risk includes higher net debt and potential decrease in estimated EBITDAR.
Frontier Group Holdings (ULCC) vs. S&P 500 (SPY)
Market Cap
$1.51B
Dividend YieldN/A
Average Volume (3M)3.24M
Price to Earnings (P/E)18.0
Beta (1Y)1.50
Revenue Growth5.18%
EPS GrowthN/A
CountryUS
Employees7,938
SectorIndustrials
Sector Strength66
IndustryTransportation
Share Statistics
EPS (TTM)0.37
Shares Outstanding227,248,470
10 Day Avg. Volume3,052,573
30 Day Avg. Volume3,244,230
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.40
Price to Cash Flow (P/CF)4.30
P/FCF Ratio5.20
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$9.50Price Target Upside43.07% Upside
Rating ConsensusHold
Number of Analyst Covering11
Frontier Group Holdings Business Overview & Revenue Model
Company DescriptionFrontier Group Holdings, Inc. (ULCC) is the parent company of Frontier Airlines, a low-cost carrier (LCC) providing commercial air travel services primarily within the United States and to select international destinations. Headquartered in Denver, Colorado, the company focuses on providing affordable travel options to customers by maintaining a streamlined operational structure and utilizing a single aircraft type to minimize costs. The airline is known for its 'Low Fares Done Right' approach, aiming to offer competitive pricing while ensuring a reliable and efficient travel experience.
How the Company Makes MoneyFrontier Group Holdings makes money primarily through the sale of airline tickets, which is the core revenue stream. Additionally, the company generates significant revenue from ancillary services, including baggage fees, seat selection fees, onboard food and beverage sales, and other optional services that enhance the travel experience. Frontier's business model is centered around maintaining a low-cost structure by optimizing aircraft utilization, reducing operational expenses, and implementing a point-to-point route strategy that bypasses traditional hub-and-spoke systems. Strategic partnerships with third-party service providers and loyalty programs also contribute to its earnings by enhancing customer engagement and expanding service offerings.
Frontier Group Holdings Financial Statement Overview
Summary
Frontier Group Holdings shows strong revenue growth and improved debt management. However, low profitability margins and weak cash flow generation are concerns for long-term financial stability.Income Statement
Frontier Group Holdings has shown significant revenue growth over the years, particularly a 5.19% increase from 2023 to 2024. The gross profit margin improved drastically, indicating better cost management. However, the net profit margin remains low, reflecting persistent challenges in achieving profitability. The company shifted from a net loss in 2023 to a net income in 2024, which is a positive sign.65
Positive
Balance Sheet
The balance sheet shows a strong recovery with zero debt in 2024, which substantially improves the debt-to-equity ratio. The equity ratio improved as well, showcasing a stronger capital structure. However, stockholder's equity remains relatively low compared to total assets, indicating room for strengthening financial stability.70
Positive
Cash Flow
Frontier showed improvement in free cash flow from a significant negative value in 2023 to a less negative figure in 2024. Despite this, the operating cash flow to net income ratio is not available for 2024 due to zero operating cash flow, limiting insights into cash generation efficiency. Free cash flow remains negative, signaling potential liquidity challenges.50
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 3.77B | 3.59B | 3.33B | 2.06B | 1.25B | Gross Profit |
| 1.94B | 302.00M | 282.00M | -202.00M | -390.00M | EBIT |
| 58.00M | -3.00M | -35.00M | -117.00M | -365.00M | EBITDA |
| 122.00M | 83.00M | 3.00M | -99.00M | -327.00M | Net Income Common Stockholders |
| 85.00M | -11.00M | -37.00M | -102.00M | -225.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 740.00M | 609.00M | 761.00M | 918.00M | 378.00M | Total Assets |
| 6.15B | 4.99B | 4.50B | 4.24B | 3.55B | Total Debt |
| 4.47B | 3.46B | 2.93B | 2.85B | 2.61B | Net Debt |
| 3.73B | 2.85B | 2.17B | 1.93B | 2.23B | Total Liabilities |
| 5.55B | 4.49B | 3.99B | 3.71B | 3.24B | Stockholders Equity |
| 604.00M | 507.00M | 509.00M | 530.00M | 310.00M |
| Cash Flow | Free Cash Flow | |||
| -158.00M | -348.00M | -230.00M | 153.00M | -573.00M | Operating Cash Flow |
| -82.00M | -261.00M | -78.00M | 216.00M | -557.00M | Investing Cash Flow |
| -75.00M | -90.00M | -154.00M | -67.00M | 11.00M | Financing Cash Flow |
| 288.00M | 199.00M | 75.00M | 391.00M | 156.00M |
Frontier Group Holdings Technical Analysis
Negative
6.64
Price Trends
7.99
Negative
7.13
Negative
5.78
Positive
Market Momentum
-0.49
Positive
30.33
Neutral
22.44
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ULCC, the sentiment is Negative. The current price of 6.64 is below the 20-day moving average (MA) of 7.92, below the 50-day MA of 7.99, and above the 200-day MA of 5.78, indicating a neutral trend. The MACD of -0.49 indicates Positive momentum. The RSI at 30.33 is Neutral, neither overbought nor oversold. The STOCH value of 22.44 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ULCC.
Frontier Group Holdings Risk Analysis
Frontier Group Holdings disclosed 56 risk factors in its most recent earnings report. Frontier Group Holdings reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Frontier Group Holdings Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $25.41B | 8.23 | 28.63% | ― | 6.23% | 20.08% | |
74 Outperform | $1.51B | 18.00 | 15.12% | ― | 5.18% | ― | |
74 Outperform | $32.51B | 9.99 | 26.19% | 1.03% | 6.19% | -25.26% | |
63 Neutral | $16.70B | 38.71 | 4.50% | 2.46% | 5.34% | -6.20% | |
62 Neutral | $8.11B | 13.34 | 1.17% | 3.02% | 4.16% | -15.14% | |
50 Neutral | $1.02B | ― | -19.93% | 3.95% | 0.11% | -311.73% | |
47 Neutral | $1.95B | ― | -26.60% | ― | -3.50% | -148.99% |
* Industrials Sector Average
Performance Comparison
ULCC
Frontier Group Holdings
6.04
-1.32
-17.93%
ALGT
Allegiant Travel Company
55.71
-14.47
-20.62%
DAL
Delta Air Lines
50.33
8.11
19.21%
JBLU
JetBlue Airways
5.52
-1.52
-21.59%
LUV
Southwest Airlines
28.18
-5.01
-15.09%
UAL
United Airlines Holdings
77.62
34.73
80.97%
Frontier Group Holdings Earnings Call Summary
Earnings Call Date: Feb 7, 2025 | % Change Since: -17.92% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
Frontier Group Holdings reported strong revenue growth, improved profit margins, and a significant expansion of its cost advantage. The company successfully launched new routes and enhanced its premium product offerings. However, challenges included reduced aircraft utilization and the potential impact of Easter timing on first-quarter performance. Overall, positive trends outweigh the lowlights, demonstrating a solid financial position and strategic improvements.Highlights
Record Revenue and Passenger Growth
Total operating revenue in the fourth quarter increased 12% year-over-year to a record $1 billion, with 33 million passengers traveling with Frontier in 2024, a 10% increase from 2023.
Improved Profit Margins
Fourth quarter adjusted pre-tax margin was 5.1%, significantly higher than the original guidance, driven by revenue and network optimization initiatives.
Cost Advantage Expansion
Frontier's cost advantage expanded to 48% in 2024 compared to 41% in 2023, maintaining a targeted cost advantage of over 40% for 2025.
New Route Launches and Network Maturity
Launched 22 new routes in December and established a 13-base network, leading to improved operational performance.
Loyalty Program and Premium Product Expansion
Co-brand card acquisitions increased 35%, and spend per cardholder rose 11% year-over-year in Q4. Plans to launch a first-class product in late 2025.
Lowlights
Reduced Aircraft Utilization
15% reduction in average daily aircraft utilization due to disciplined capacity deployment, impacting CASM excluding fuel.
Impact of Easter Timing
Expected drag on first-quarter performance due to the late Easter timing, potentially affecting revenue patterns.
Company Guidance
During the Frontier Group Holdings, Inc. Q4 and full-year 2024 earnings call, the company provided guidance indicating a focus on achieving double-digit pre-tax margins in the summer of 2025. The fourth quarter adjusted pre-tax margin was reported at 5.1%, with total operating revenue increasing by 12% year-over-year to a record $1 billion despite a 2% decrease in capacity. Revenue per available seat mile (RASM) rose by 15% to 10.23 cents, driven by strong demand and network optimization. Frontier expects to maintain a cost advantage of over 40% in 2025, supported by disciplined capacity deployment and commercial initiatives. The company also highlighted plans for premium seating and loyalty program enhancements to bolster revenue growth. Overall, Frontier is targeting at least $1 per share in adjusted diluted EPS for 2025, signaling confidence in its strategic initiatives and operational improvements.Frontier Group Holdings Corporate Events
Private Placements and FinancingM&A TransactionsBusiness Operations and Strategy
Frontier Group Revises Merger Proposal with Spirit Airlines
Neutral
Feb 12, 2025
On February 11, 2025, Frontier Group Holdings, Inc. issued a revised proposal to merge with Spirit Airlines, which includes issuing $400 million in debt and 19% of Frontier’s equity to Spirit’s stakeholders. The proposal eliminates the necessity for Spirit to conduct a $350 million equity rights offering. Despite the revised offer, no agreement was reached, and Spirit plans to continue its standalone restructuring, indicating potential implications for stakeholders and the airline industry’s competitive landscape.
Private Placements and FinancingM&A Transactions
Frontier Group Proposes Merger with Spirit Airlines
Neutral
Jan 29, 2025
On January 29, 2025, Spirit Airlines disclosed it received a proposal from Frontier Group Holdings for a potential merger, aiming to form a large-scale, low-fare airline. The proposal includes issuing $400 million in debt and 19% common equity to Spirit’s stakeholders, enhancing value compared to Spirit’s existing reorganization plan. However, no agreement has been reached, and the outcome remains uncertain, affecting the company’s future operations and stakeholder interests.
Business Operations and StrategyFinancial Disclosures
Frontier Group Holdings Boosts Q4 2024 Financial Outlook
Positive
Jan 6, 2025
Frontier Group Holdings has upgraded its fourth quarter 2024 financial outlook, citing improved revenue and operational performance due to initiatives like network optimization and capacity growth moderation. The company anticipates a 4% pre-tax margin, an increase from earlier estimates, and a 14% rise in revenue per available seat mile compared to the previous year.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.