Fannie Mae, Freddie Mac shares tumble after conservatorship comments
On Thursday, Citi analyst Stephen Trent (NSE:TREN) announced the resumption of coverage on Frontier Group Holdings Inc (NASDAQ: NASDAQ:ULCC), assigning a Neutral rating and establishing a price target of $7.25. According to InvestingPro data, Frontier, currently valued at $1.35 billion, shows a mixed financial picture with weak overall health scores. Trent noted that Frontier is demonstrating improved operational performance compared to its discount airline competitors, including the generation of a modest amount of positive free cash flow (FCF).
The analyst pointed out that while Frontier is showing better results, tax credits are playing a significant role in its earnings growth. InvestingPro analysis reveals concerning metrics, including a high debt-to-equity ratio of 7.4x and notably weak gross profit margins of 6.86%. Additionally, he mentioned potential challenges such as the impact of tariffs on sale/leaseback transactions and the likelihood of increased labor costs. The latter stems from ongoing negotiations for contract amendments with its pilots, a process that many of Frontier’s peers have already completed.
Trent’s analysis suggests that Frontier’s current financial health is somewhat bolstered by external factors like tax credits. He also raises concerns about the airline’s future expenses and its ability to sustain profitability amidst potential pressures from tariffs and labor costs.
The resumption of coverage by Citi comes as Frontier navigates a competitive landscape in the airline industry, where cost management and operational efficiency are critical for success. The airline’s positive FCF is a promising sign, but the analyst cautions investors about the possible headwinds on the horizon.
Frontier Group Holdings Inc’s stock performance will continue to be monitored by investors as the company progresses with its operational strategies and labor negotiations. The Neutral rating reflects a cautious but watchful stance on the part of Citi, considering both the achievements and challenges that lie ahead for the carrier.
In other recent news, Frontier Group Holdings reported impressive fourth-quarter 2024 earnings, with earnings per share (EPS) of $0.23, significantly surpassing the forecasted $0.04. The airline also achieved a 12% year-over-year revenue increase, reaching $1 billion for the quarter. UBS analyst Thomas Wadewitz raised the price target for Frontier Group to $10.00, citing strong earnings and optimistic guidance for fiscal year 2025. Similarly, TD Cowen analyst Tom Fitzgerald adjusted the price target to $10.00, maintaining a Hold rating while highlighting positive revenue and network strategies.
Frontier Group’s forward guidance suggests a minimum EPS of $1.00 for FY’25, exceeding both UBS’s estimate of $0.66 and the consensus of $0.69. The company is focusing on initiatives to increase loyalty income and enhance its premium offerings, which are expected to contribute to revenue growth. In other developments, Chief Accounting Officer Josh Wetzel announced his resignation, effective May 30, 2025, with no successor named yet. Frontier Group Holdings is actively seeking a new executive to fill this critical role as the company moves forward with its strategic initiatives.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.